Select Page

Electronic Evidence – Fear and Loathing in the Legal Profession

The best aspect of law school is the subordination of math.

Anon
________

The schematic displayed above (click for a blow up in pdf format) is a simplified illustration of a corporate network which Microsoft provided to the Federal Rules Committee in connection with proceedings on electronic evidence. It was intended to illustrate a generic corporate computer network.

If you are a lawyer and this seems like an alien concept that no lawyer should ever be required to understand, you’re not alone. Lets face it – like most stereotypes, the old joke that lawyers go to law school to avoid math and technology contains a large element of truth.

So, it’s not hard to sense the anxiety emanating from the hallways of the nation’s law offices as the electronic discovery tsunami picks up speed. Yes, there’s a new technology boom, but it’s not the kind that sent clients flocking to their lawyers for legal representation in the 1990s. Many lawyers in their 50s and 60s can barely find the caps lock key on a computer keyboard, much less learn the intricacies of “IT“.

Nevertheless, every day emails and brochures arrive announcing seminars and warning that the era of electronic data discovery (EDD) has finally, truly arrived. Luddite lawyers are warned that –

  • 99% of all documents created today are in electronic form.
  • Changes to the federal rules of civil procedure that will take effect on December 1st will require lawyers to be far more familiar with client information systems than in the past, and to work cooperatively with opposing counsel to preserve, retrieve and produce electronic data.
  • Ignorance of the law (or of technology) is not a defense (!) The poster child for just how bad this can get is the Morgan Stanley case in Florida, where the trial judge ordered the jury to draw an adverse inference based on Morgan Stanley’s failure to turn over electronic documents, leading to a $600 million plus jury verdict against Morgan Stanley.

Of course, the law being what it is, the full implications of all of this are impossible to forsee. And the more you think about it, the worse it gets. How do you locate relevant electronic data in your client’s network? How do you review electronic data for relevance, work product and privilege? How do you designate individual documents “confidential” or “attorney’s eyes only” when they are part of a massive data file? How do you capture metadata? (What is metadata? Helpful hint: “metadata is information about information”). How do you capture and review data that uses software systems the client has abandoned (a surprisingly common problem)? How do you ensure that attachments accompany their original emails?

If you think the last question doesn’t present a problem, our firm can tell you about an opposing party that produced a massive Outlook email file that had been converted to an ASCII text file, and in the process had all the attachments stripped away. It took quite a bit of explaining on our part for the opposing lawyer to even understand the problem. Then, rather than incur the cost of reviewing this mass of material, the opposing party produced its entire email database for a several year period, disclosing not only irrelevant, privileged and technical client information, but personal medical records of employees.

Of course, what’s bad for the lawyers and courts is always good for the experts. The demand for computer forensic experts that can address these questions (and a hundred more), as well as take potshots at the opposing party’s EDD, will undoubtedly flourish. Kroll has already staked out a big piece of this business, but there is room for countless smaller players as the industry evolves. Courts and lawyers can’t possibly be expected to understand all of this stuff themselves. In the end, the losers will be the lawyers and law firms that can’t master this process, and the clients who are forced to pay for it.

Recent Cases (or, Lawyers Behaving Badly)

Don’t get me wrong, I have nothing, nothing, against leasing companies. But it seems that some people do, so it grabs my attention when a leasing company sues for breach of a lease and not only loses its case but gets hit with a counterclaim that results in a judgment for violation of M.G.L. c. 93A (the Massachusetts “unfair and deceptive acts and practices” statute). This was the outcome in General Electric Capital v. MHPG, Inc. Following default on the lease GE sued not only its lessee, MHPG, but (since MHPG was insolvent), the next best thing, the company’s stockholders and directors. After all, you’ve got to go where the money is, right?

After Massachusetts Superior Court Judge Ernest B. Murphy (no stranger to controversy himself) rejected GE’s attempt to “pierce the corporate veil” he ruled that GE’s suit against the shareholders/directors was a violation of c. 93A (the Massachusetts statute prohibiting “unfair or deceptive acts or practices”). To quote:

As the case progressed . . . GE learned there was no personal guaranty from either of the [directors] and that both had left MHPG almost two years prior to the default under the lease.

Even after having been alerted to the absence of any personal guarantees, GE . . . vigorously prosecuted the case against [the directors]. This Court finds this continued litigation inexcusable, and well parametrized within a pattern of behavior which was “immoral, unethical, oppressive, [and] unscrupulous.” The pursuit of satisfaction under the lease may not be legitimately furthered through oppressive legal action against clearly legally disinterested parties. Therefore, this Court grants summary judgment in favor of defendants London and Miller’s counterclaims, as to liability.

Lawyers are trained to be zealous in the representation of their clients, but there’s a fine line between zealousness and abuse, and it looks like GE’s lawyers may have gone a bit too far on this one. However, it’s a safe bet that GE will take this case to the Appeals Court before paying on this counterclaim.

Lawyer beware!

Jury Trials In Massachusetts – "Not"

In the strange heat all litigation brings to bear on things, the very process of litigation fosters the most profound misunderstandings in the world. Renata Adler

_______________

The Boston Bar Association (BBA) today issued a report entitled Report of the Boston Bar Association – Task Force on the Vanishing Jury Trial. The subtitle is “Jury Trial Trends in Massachusetts: The Need to Ensure Jury Trial Competency among Practicing Attorneys as a Result of the Vanishing Jury Trial Phenomenon.”

Lawyers may be forgetting how to try cases, but they haven’t forgotten how to write. Apart from the 37 words in the title, the full report is 38 pages long. It provides convincing evidence of the long-term trend toward a decline in jury trials (in both federal and state courts), and bemoans the fact that lawyers are experiencing this legal epiphany less often than in the past.

While I’m as “up” for a good old rollicking jury trial as the next guy or gal — with its enormous expense, unpredictability, risk of jury nullification, ignorance or disinterest, and stress on all concerned (mostly the clients) — I’m not sure that fewer jury trials is a “bad thing.” I would liken it to dentists bemoaning the lost opportunity to fill cavities. Darn that fluoride, flossing and better hygiene!

Personally, after 27 years in this “business”, I would attribute the dearth of civil trials to the following:

  • Clients are far more sophisticated, and they are able to pull the plug (i.e., settle) more often. They are less dependent on their lawyers for the decision to do this. The prevalence of in-house counsel, who can advise more objectively on the issues, helps clients figure out what’s in their best interest.
  • Judges are far more willing to issue summary judgment – to decide the case on the papers, without a trial.
  • Lawyers are too expensive and, perforce, so are trials. Clients want to avoid that expense.
  • Juries are notoriously unpredictable. Nothing new, but the news media has, I believe, made people more aware of this.
  • The courts are too slow, and have priced themselves out of the market. Arbitration has become a good alternative to the jury trial – usually (note emphasis) it is faster, less expensive and more reliable in terms of a rational result. And, it eliminates the risk of a time-consuming and expensive appeal.
  • Mediation resolves cases a very high percentage of the time, and parties are more sophisticated in electing to utilize it.

Oh, and the “vanishing jury trial” is not limited to the Massachusetts state courts by any means.

I tell clients from the first day a dispute arises that, no matter how angry or enthusiastic for a trial they may be, their case is likely (statistically speaking) to settle, and that they should constantly keep settlement options actively in mind. I tell them that the only reason a civil case should go to trial is if one side badly misjudges the facts or law underlying the case. If the case is close, it should settle (why take the risk of an all or nothing gamble?). If it is one-sided, it should settle, since it should be clear that one side is likely to lose.

Sadly, too many lawyers (you hear their ads on the radio and see them in the legal journals – “courtroom lawyers,” “trial lawyers”) are often as willing to take their clients to trial as generals are to commit their troops to battle.

So, the jury trial is dead, or at least moribund. Long live the jury trial!

Viral Video, YouTube and Whack-a-Mole, or Why Mark Cuban is Wrong

I quote from News.com on September 28th:

Cuban, co-founder of HDNet and owner of the NBA’s Dallas Mavericks, also said YouTube would eventually be “sued into oblivion” because of copyright violations.

“They are just breaking the law,” Cuban told a group of advertisers in New York. “The only reason it hasn’t been sued yet is because there is nobody with big money to sue.”

* * *

Cuban said “anyone who buys that (YouTube) is a moron” because of potential lawsuits from copyright violations.

“There is a reason they haven’t yet gone public, they haven’t sold. It’s because they are going to be toasted,” said Cuban, who has sold start-ups to Yahoo and CompuServe.

The outspoken (to put it mildly) Cuban, billionaire owner of the Dallas Mavericks and Chairman of HDTV cable network has repeated this message loudly and often, both before and after Google’s $1.6 billion purchase offer to YouTube. Many other media sources appear to have picked up the tune, and the media-giant mouthpieces have added to the volume by rattling their sabers, implying that its only a matter of time before this “mother of all lawsuits” is forthcoming.

Don’t believe a word of it. Surprisingly few observers have asked the pertinent question here: do the Supreme Court’s 1995 Grokster decision and the DMCA (the Digital Millennium Copyright Act) protect YouTube from liability for copyright-protected works posted by third parties (third parties being the law’s awkward way of saying someone other than YouTube itself)?

Grokster sets the legal standard for contributory copyright infringement, in this context a product or service (YouTube) that encourages or assists third parties to post infringing works. Based on what I’ve observed, it seems that YouTube has been well advised by some pretty savvy lawyers, and that as a result it has stayed on the safe side of the line defined by Grokster. I’ve read of no evidence suggesting that YouTube has intended its service to be used for infringing works, or that it has done anything to foster infringement. If such evidence existed, you can be sure the media companies would let us know, and they haven’t. We also can be pretty sure that Google carefully vetted YouTube for this issue, and that if it had found adverse evidence, YouTube would still be flying solo.

As to the second issue, the DMCA, this federal law provides a strict “notice and take down” procedure that requires copyright owners to give written notice of an infringing work posted by a third party to the web host, including its precise location (its URL), as part of a demand that the work be “taken down.” There is no suggestion that YouTube has not responded in a timely way to legitimate take-down requests, and in fact the press has reported that YouTube has attempted to develop technologies that can help identify copyrighted works. (If this is true it would weigh even more heavily in YouTube’s favor in evaluating YouTube’s intent for purposes of applying Grokser).

All YouTube needs to do is hire a staff capable of looking at a take-down notice and removing the work at the identified URL. Ten, fifty, maybe a hundred FTEs, perhaps working in India or another low-wage country, should be sufficient, and hence the “whack a mole” metaphor – I can for-see copyright owners being forced to constantly scan YouTube to catch their copyrighted works when they pop up over and over again (posted by different users), and repeatedly provide infringement notices to YouTube. To put it differently, and a bit crudely, every time a copyrighted work pops up the copyright owner would “whack the mole” by sending a take-down notice. Of course, the media companies could themselves hire low-wage foreign workers to scan YouTube, and issue the take-down notices, creating more third-world employment on both sides of the equation. Strange but true …

Lies, Damn Lies, and Statistics

I’ve been meaning to post some statistics reported by Price Waterhouse Coopers at the MCLE 9th Annual Intellectual Property Conference earlier this year. PWC has done a rigorous study of patent and trademark cases in the Federal District Courts and at the Court of Appeals for the Federal Circuit (CAFC) over the last 25 years. A few highlights and trends:

  • In 2005, 4% of patent cases and 1.5% of trademark cases went through trial. (Presumably the balance were resolved via settlement or summary judgment).
  • Juries award more damages in patent cases than bench trials. On the other hand, bench trials are more popular in trademark cases.
  • The CAFC is a tough court: only 30% of damage awards are affirmed by the CAFC.
  • Patent damage awards far exceed trademark damage awards.
  • Patent awards’ fastest growth has been in the computer business services and electronics components sectors.
  • Reasonable royalties (rather than lost profits) has become the most frequent measure of damages awarded in patent cases. (This may reflect the fact that more plaintiffs are nonpracticing inventors (sometimes referred to as “patent trolls“).