by Lee Gesmer | Dec 1, 2006 | Courts, Litigation
At long last, the highly anticipated amendments to the new federal rules of civil procedure are here. The federal court system has amended its rules of procedure to address electronic discovery, aka “e-discovery”. The amendments became effective on December 1, 2006.
Unfortunately, this news has been greeted with yawns from many attorneys who believe this is just another run-of-the-mill procedural change. Far from it; the e-discovery revolution represented by this rules change – and it is a revolution – is anything but ordinary, and the courts (which have been warming up to this issue for some time) have warned that its effects will be profound and far-reaching.
The rule changes themselves may not appear earth-shattering, but they change the standard for both lawyers and clients as it relates to the exchange and management of information in litigation. Since the federal court system has provided summaries of the changes (see rules 16, 26, 33, 34, 37 and 45), we won’t go into fine detail. However, there are a few changes worth highlighting, including the obligations placed on litigants and the courts to confront e-discovery at the outset of a case (see rules 16 and 26), the definitional changes designed to address “electronically stored information” (see rules 26 and 34), and the “safe harbor” exception which protects parties from sanctions if data is lost during the routine, good-faith operation of their computer system (see rule 37).
What is truly special about e-discovery, however, is not really the letter of the law. What all lawyers should know is that courts and the new federal rules have placed a significant part of the responsibility for the location, preservation and production of litigants’ electronic data on their attorneys. One need only review the following examples to get the picture:
- Zubulake v. UBS Warburg LLC, (S.D.N.Y. July 20, 2004) – “Counsel must oversee compliance with the litigation hold, monitoring the party’s efforts to retain and produce the relevant documents. . . Once a ‘litigation hold’ is in place, a party and her counsel must make certain that all sources of potentially relevant information are identified and placed ‘on hold,’ . . . To do this, counsel must become fully familiar with her client’s document retention policies, as well as the client’s data retention architecture. This will invariably involve speaking with information technology personnel, who can explain system-wide backup procedures and the actual (as opposed to theoretical) implementation of the firm’s recycling policy. It will also involve communicating with the ‘key players’ in the litigation, in order to understand how they stored information. . . Once a party and her counsel have identified all of the sources of potentially relevant information, they are under a duty to retain that information . . . and to produce information responsive to the opposing party’s requests. . . . There are thus a number of steps that counsel should take to ensure compliance with the preservation obligation. While these precautions may not be enough (or may be too much) in some cases, they are designed to promote the continued preservation of potentially relevant information in the typical case. First, counsel must issue a ‘litigation hold’ at the outset of litigation or whenever litigation is reasonably anticipated. The litigation hold should be periodically re-issued so that new employees are aware of it, and so that it is fresh in the minds of all employees. Second, counsel should communicate directly with the ‘key players’ in the litigation, i.e., the people identified in a party’s initial disclosure and any subsequent supplementation thereto. Because these ‘key players’ are the ’employees likely to have relevant information’, it is particularly important that the preservation duty be communicated clearly to them. As with the litigation hold, the key players should be periodically reminded that the preservation duty is still in place. Finally, counsel should instruct all employees to produce electronic copies of their relevant active files. Counsel must also make sure that all backup media which the party is required to retain is identified and stored in a safe place.”
- Heng Chan v. Triple 8 Palace, (S.D.N.Y. Aug. 11, 2005) – “The preservation obligation runs first to counsel, who has a duty to advise his client of the type of information potentially relevant to the lawsuit and of the necessity of preventing its destruction. . . Where the client is a business, its managers, in turn, are responsible for conveying to the employees the requirements for preserving evidence. . . Thus, once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents. When the failure to meet these obligations results in the destruction of evidence, sanctions are warranted. And, though the nature of the sanction depends in part on the state of mind of the destroyer, some remedy may be appropriate even where the destruction is merely negligent.”
Until now, issues related to document preservation fell squarely on the client who, after all, typically has exclusive control over their own documents and information. For various reasons, including the dynamic nature of electronic data and modern computer systems as well as several high-profile e-discovery catastrophes involving large corporations, the courts are now are placing affirmative and stringent obligations on attorneys. And in-house attorneys should note that these obligations do not end with outside litigation counsel but expressly include in-house counsel and appear to reach any attorney who advises their clients about litigation or document retention.
The new federal rules require attorneys to confer about their clients’ electronic data and make “electronically stored information” completely discoverable. Therefore, the amended federal rules now require lawyers to investigate and understand their client’s computer systems and data and ensure that the relevant data is preserved and then produced in accordance with their discovery obligations. Gone are the days when lawyers could tell a federal judge that they don’t understand all of this technical computer stuff.
While these e-discovery obligations must be taken seriously, there is no reason to feel overwhelmed. In fact, if you’ve read this far then you should already be able to identify many of the key issues and pitfalls. Moreover, today there are numerous legal decisions highlighting the mistakes of others from which we can all learn a tremendous amount. There is also available a wealth of publications, vendors and other resources focusing on e-discovery. These resources – which were practically nonexistent just 3-4 years ago – now make it possible for lawyers, including the non-specialist, to understand and keep up with this evolving issue.
by Lee Gesmer | Nov 9, 2006 | Courts
You no longer have to wait to read the oral argument in a Supreme Court case that has been argued. The Supremes now make the full transcript of oral argument available on a same day basis. This is very cool for the .0001 percent of the population that loves this stuff.
Yes, I know this is not a current picture, but the more current ones just don’t do the trick.
by Lee Gesmer | Nov 3, 2006 | What Were They Thinking
Two updates:
First, I learned today (12/11/06) that the hearing officer in this case, Ellen Carpenter, tragically passed away at the age of 52.
Second, Boston Magazine alerted me to an article discussing the Demoulas/Law Clerk scandal. If you want a quick summary of the case, Boston Magazine-style, click here for The Demoulas Trap:
Secret tape recordings. Clandestine meetings. Fake identities. Nothing was off-limits when supermarket tycoon Telemachus Demoulas’s desperate legal team hatched its plan to squeeze Paul Walsh. A billion dollars was at stake in the nastiest civil court case in state history, and the lowly court clerk was an easy mark. Until he decided to fight back.
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On October 16, 2006, the Massachusetts Board of Bar Overseers issued its long-awaited decision in the Demoulas attorney misconduct case, essentially affirming the hearing officer (Ellen Carpenter) in her decision recommending disbarment of three Massachusetts lawyers. The BBO accepted the recommendation of the hearing officer and ordered the disbarment of two of the attorneys (Gary Crossen and Kevin Curry), and ordered that the third attorney, Richard Donahue, be suspended for three years.
The three attorneys now have one more shot at vindication, before the Supreme Judicial Court. Don’t hold your breath.
I discussed this matter in some detail a six months ago in one of my first “what were they thinking” blogs.
I quote from the final paragraph of the BBO’s decision, which says it all.
[The publicity associated with this case] has taken an ugly toll on the public’s perception of the legal profession and those who practice it. By their conduct, as the hearing officer observed, [Crossen, Curry and Donahue] have “brought shame and disrepute upon the bar. They have left what one can only hope is not an indelible impression that lawyers, even very prominent ones, will do almost anything to prevail if enough money is at stake and available for their use.” . . . We wholeheartedly agree.
This case (both the original Carpenter decision and the BBO decision) offer a clear look at the sordid underbelly of the legal profession. John Grisham only wishes that he could have come up with a plot this bizarre. The BBO and hearing officer’s decisions should be read by the public, and should be mandatory reading for attorneys.
by Lee Gesmer | Oct 26, 2006 | Courts, Litigation, Technology
The best aspect of law school is the subordination of math.
Anon
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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.
by Lee Gesmer | Oct 25, 2006 | What Were They Thinking
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!
