Guidance’s Computer Enterprise Investigation Conference 2009

D4 LLC exhibited at the Computer Enterprise Investigation Conference (CEIC) for the first time in Orlando on May 17-20, 2009.  I have attended the show for the last four years and it was an honor to present again on e-Discovery.

CEIC always brings together the most educated people on computer forensics, e-Discovery, information security systems and law enforcement.  I participated in Guidance’s first “Birds of a Feather” meeting, where we discussed everything from collection of ESI, MD5 Hash Values and the finer points of the practice of law with technology. 

I presented “What Goes Bump in the Night,” focusing on many of the new Web 2.0 litigation cases.  Below is a video clip from the presentation on personal jurisdiction.

The Keynote Speaker was Leonard Nimoy, whose personal story of “trains, horses and starships” was extremely entertaining.  He is also a very kind man who took the time to greet many of the attendees. 

 

I look forward to CEIC 2010 and congratulate Guidance on a very successful conference.

Is ONE Keyword Adequate for a Search?

Magistrate Judge Facciola’s Asarco, Inc. v. United States EPA, 2009 U.S. Dist. LEXIS 37182 (D.D.C. Apr. 28, 2009) dealt with a very brief issue:

Was one keyword adequate for the search of electronically stored information? 

Short answer: No

In Asarco, the Plaintiff opposed a summary judgment motion and sought leave to take discovery.  The Plaintiff claimed the Defendants had acted in bad faith and claimed Defendants only used the search term “recontamination” in their ESI search.  Asarco, 7.

Judge Facciola ordered the Defendants to perform another key word search using the Plaintiff’s four keywords: 1) “recontaminate,” 2) “recontaminat,” 3) “recontamination,” and 4) “contaminate again.” Asarco, 7-8. 

Ironically, the search terms derivative of the term “recontamination” should have positive results in a Pre-Discovery tool such as Clearwell or a litigation support database with the search term “recontam*”. 

This raises a fundamental question when searching electronically stored information: What are an adequate number of search terms? 

Answer: Totally depends on the case.

In William A. Gross Constr. Assocs. v. Am. Mfrs. Mut. Ins. Co., 2009 U.S. Dist. LEXIS 22903 (S.D.N.Y. Mar. 19, 2009), one party proposed a few basic search terms to search a non-party’s email system. 

The other party provided several thousand terms. 

The non-party understandably only wanted to produce emails that related to the subject matter of the litigation.

Magistrate Judge Peck ordered the parties to use the “narrow” terms, variations of the parties names and the names of the personnel involved in the construction.  William A. Gross Constr. Assocs., 10.

In another case out of Kansas, a Court ordered search terms to include first names, abbreviated first names and last names of the parties in the lawsuit.  Patterson v. Goodyear Tire & Rubber Co., 2009 U.S. Dist. LEXIS 34585, 17-18 (D. Kan. Apr. 23, 2009).

On the other extreme, in a Copyright & Computer Fraud and Abuse case between Oracle and SAP, the parties were in a dispute to limit discovery to 165 custodians on an ancillary issue in the case.  The estimated discovery cost for the 165 custodians was $16.5 million.  One can imagine the number of terms, names and dates being employed as search terms in such litigation.  Oracle Corporation, et al., v. SAP AG, et al., 2008 U.S. Dist. LEXIS 88319.

The number of search terms required for a search to be “adequate” will turn on the facts of each case.  There will not be a bright line rule, other then being diligent and understand the technology your law firm and experts are using.

Surfing for Personal Jurisdiction from Online Activity

The internet has made applying the traditional touchstones for personal jurisdiction challenging. Ever so slowly courts have addressed the personal jurisdiction questions in internet cases, to arrive at a point now where there may not be bright lines to guide us; but there are definitely guidelines emerging.

U.S. District Court Judge Edward J. Lodge, Sky Capital Group, LLC v. Rojas, 2009 U.S. Dist. LEXIS 37132, 11 (D. Idaho Apr. 30, 2009)

May 13^th is the anniversary of Pennoyer v. Neff, 95 U.S. 714 (1878), one of the great personal jurisdiction cases, followed by International Shoe Co. v. Washington, 326 U.S. 310 (1945), Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987) and Burnham v. Superior Court of California, 495 U.S. 604 (1990).  It is only appropriate to write about personal jurisdiction on the anniversary of this major decision. 

The United States Constitution requires a court to have personal jurisdiction over the parties to decide a case in controversy. U.S. CONST. Amend. XIV. Perhaps it is just guys in bow ties and Civil Procedure professors, but the intersection of online activity and a Court exercising personal jurisdiction is an exciting area of case law.  The entire concept of where is it fair to sue someone, or where there are minimum contacts from online business, are topics that could make a law student’s head spin. 

It is antithetical to our civil justice system to have people sued as a “result of random, fortuitous, or attenuated contacts or on account of the unilateral activity of third parties” due to blogging, Facebook or people simply maintaining a website.  Burger King Corp. v. Rudzewicz, 471 U.S. 462, 471 (U.S. 1985).  Courts have been crafting personal jurisdiction requirements for online contracts and torts for a decade.  The following is one of those cases. 

Truck Stops & Economic Torts

Sky Capital Group, LLC v. Rojas, 2009 U.S. Dist. LEXIS 37132 (D. Idaho Apr. 30, 2009) is a story of alleged trade secret violations by out-of-state Defendants intentionally accessing the Plaintiffs computer servers. Sky Capital Group, 12.

Sky Capital Group, LLC (dba Roady’s Truck Stops), an Idaho limited liability company, employed the two Defendants after a business acquisition. One Defendant was based in Florida and the other in Wisconsin. 

Roady’s sued the Defendants for trade secret violations and economic torts by unlawfully accessing Roady’s administrative and email servers located in Idaho after their employment ended.

Roady’s sued the Defendants in Idaho and the Defendants sought dismissal for lack of personal jurisdiction.

Short Overview of Personal Jurisdiction Rules

The 9^th Circuit requires a three part test to exercise specific personal jurisdiction:

(A) The nonresident defendant must purposefully conduct activities within the forum;

(B) The claim must arise or result from forum-related activities; and

(C) The exercise of jurisdiction must be reasonable. Sky Capital Group, 6, citing Doe, 248 F.3d at 923.

Knowledge that the plaintiffs are in a specific state is not enough for a court to exercise jurisdiction.  Courts require “something more” to show a defendant directed their actions to a specific state.  Sky Capital Group, 11.

The Court found that the Defendants accessing the Plaintiffs’ servers was the “something more” the Court needed to exercise personal jurisdiction over the Defendants. 

Intention Acts: Accessing Servers

The “intentional actions” of accessing the Plaintiffs’ computer serves included logging onto the system, and accessing proprietary information including, “recorded customer lists, vendor lists, pricing information, marketing information and other valuable customer and company information.”  Sky Capital Group, 12.  Such directed activity in accessing the computer systems was such that the Defendants “should have reasonably anticipated being sued in Idaho.”  Sky Capital Group, 13. 

Expressly Aimed at Idaho

The “expressly aimed” requirement is defined as “when the defendant is alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state.” Sky Capital Group, 14, citing Bancroft & Masters, Inc. v. Augusta Nat’l, Inc., 223 F.3d 1082, 1087 (9th Cir. 2000). 

This rule also requires “something more” besides an action having a foreseeable effect in a forum state for personal jurisdiction.  Sky Capital Group, 14. 

The defendant had to knowing a plaintiff is a resident of “the forum state and that the harm resulting from the intentional act will be suffered in the forum state.” Sky Capital Group, 14-15. 

The fact the out-of-state Defendants knew Roady’s was located in Idaho, coupled with the allegation of taking proprietary business information to compete directly with the Roady’s, was a sufficient showing to meet the expressly aimed requirement.  Sky Capital Group, 15.

Causing Harm in Idaho

The Court found the “harm in the forum state” also met, based on the fact the Defendants knew the Plaintiff was located in Idaho and their conduct would cause the Plaintiff harm.  Sky Capital Group, 16-17. 

Lessons Learned

Way back when I had Civil Procedure in 1998, the course books had not even touched personal jurisdiction from online activity.  This will become standard analysis as Generation X lawyers become partners and Net Geners become associates.  The volume of online business, Web 2.0 activity, let alone continued advancements of iPhones and BlackBerries, will ensure these issues continue to develop. 

I’d just like to avoid a giant split Supreme Court decision like Asahi Metal Industry Co. v. Superior Court when the Courts determine bright lines for personal jurisdiction from online activity.

Name that Form of Production: Converting ESI to TIFF without Metadata is Not a Reasonably Useable Form

Bray & Gillespie Mgmt. LLC v. Lexington Ins. Co., 2009 U.S. Dist. LEXIS 21250 (M.D. Fla. Mar. 4, 2009) is a lengthy opinion covering Rule 34 requests, form of production issues concerning metadata, reasonably useable form of production, ethical responsibilities for candor to the Court and Opposing Parties and sanctions.  One could imagine the fact pattern on a Bar exam for issue spotting. 

The Procedural History Highlights

Defendant Lexington Ins. Company requested electronically stored information “in native form without deletion or alteration of metadata” from Plaintiff Bray & Gillespie. Bray & Gillespie, 13.  Bray & Gillespie (B&G) instead produced non-searchable TIFFs stripped of metadata.  Several attorneys from Reed Smith also withheld material information and made misrepresentations to the Court and Opposing Counsel as the motion to compel saga played out. 

Lexington Ins. Company sought sanctions against the Plaintiffs and to compel the production of ESI with metadata. 

Short Overview of ESI Collection

B&G had student interns download electronically stored information and scan paper documents.  This information was copied to a “Target Hard Drive” and given to the law firm Anderson, Kill & Olick, P.C.  Extractiva was then used to convert the ESI to static images (TIFFs) and extract metadata.  This ESI was then loaded onto an Introspect review database.  Bray & Gillespie, 7-8.

Reed Smith became the attorneys for B&G after one of the lawyers left Anderson, Kill & Olick, P.C. 

The Discovery Request & Production

After Lexington made discovery requests for electronically stored information, the Plaintiffs produced paper documents on disk and agreed to a “rolling production.”  Bray & Gillespie, 14-15.  The Defendants brought a motion to compel several months later when the Plaintiffs had not begun a “rolling production.”  Bray & Gillespie, 17.

Nearly four months after the rolling production agreement, the Plaintiff produced some ESI from the Introspect database on disk.  Bray & Gillespie, 18. 

The Defendants renewed a motion to compel shortly after the first ESI production.  Bray & Gillespie, 20.  A second production followed after a Court order.

As the Defendants began reviewing the ESI productions, they learned the ESI was in TIFF format, with no metadata or extracted text for author, data, or subject.  Bray & Gillespie, 22-23.

Producing ESI in a Reasonably Useable Form

The Court stated that producing the ESI in TIFF format without metadata eliminated the search capabilities compared to producing the ESI in native form.  As such, the ESI production was not in a reasonably useable form.  Bray & Gillespie, 23.

There were two options for making the production searchable: Option 1) OCR the TIFFs and then run ALCoder over the OCR to populate database fields for author, date, etc.  This would cause an additional cost to the Defendants, since the material was already searchable in native file form.  Option 2) Produce ESI in native form with extracted text, which makes use of the already searchable native files. 

 …and then Things Get Worse with Misrepresentation to Court on ESI Collection

You know someone is getting sanctioned when a Judge uses a lawyer’s name and the phrase “concocted a story” in an opinion. 

One of the Plaintiff lawyers represented to the Opposing Party and the Court that the Plaintiff printed all of the ESI and it was then scanned as TIFFs.  Bray & Gillespie, 25.

The Court summed up the “concocted story” as ignoring readily available or known facts pertaining to the collection and production of ESI.  Bray & Gillespie, 25-26. 

Enter the Sanctions Motion

The Defendants were not happy.  The Defendants claimed the Plaintiffs violated the Court order to produce ESI according to the form of production stated in the discovery requests.  The Defendants sought production of ESI according to the discovery requests, striking portions of the Plaintiffs’ claims and reasonable costs. Bray & Gillespie, 28.

The Court ordered B&G to produce to the Defendants the Plaintiffs’ Introspect database, minus any privileged ESI.  Bray & Gillespie, 66.  Additionally, B&G was ordered to pay all costs, including buying software or hiring someone to copy the litigation support database.  Bray & Gillespie, 67-68. 

The Plaintiffs were also required to allow a Defense computer expert direct access to the Plaintiffs’ Introspect database to confirm all non-privileged information had been produced.  Bray & Gillespie, 67-68. 

The lead attorney for the Plaintiffs was sanctioned and ordered to pay attorney’s fees and costs, which included the testifying expert and the Court reporter for transcribing the sanctions hearing. Bray & Gillespie, 71-72.   Others were sanctioned as well.

This is a very lengthy case that is fact intensive.  Every detail is not summarized in this blog.  The case is worth reviewing for the discussion on the reasonably useable form of production, discovery misconduct and the sanctions motion.

Know Your Client’s ESI: You Really Don’t Want a Judge Saying, “This is Unacceptable”

This may surprise a few people: There is another magistrate judge besides Judge Waxse writing ESI opinions in Kansas.  Magistrate Judge Donald Bostwick issued an order granting in part and denying in part a motion to compel ESI in Patterson v. Goodyear Tire & Rubber Co., 2009 U.S. Dist. LEXIS 34585, 15 (D. Kan. Apr. 23, 2009).

The parties in Patterson made a big mistake: They neglected their ESI obligations under both the Federal Rules of Civil Procedure and the United States District Court for the District of Kansas Guidelines for Discovery of Electronically Stored Information (ESI). 

The Kansas Guidelines require attorneys to become familiar with their client’s information systems before the Rule 26(f) conference.  That did not happen.  Patterson, 17. 

Further complicating things for the parties, the Initial Order Regarding Planning and Scheduling directed the attorneys to familiarize themselves with the ESI provisions of the Federal Rules of Civil Procedure before Rule 26(f) planning conference.  Patterson, 15.

Three and a half months BEFORE the close of discovery, the Plaintiffs served Discovery requests for electronically stored information to the Defendants.  In the words of the Court: “This is unacceptable.”  Patterson, 17. 

The only chance the Plaintiffs had for any ESI being produced would turn on Defendants’ back-up tapes subject to a litigation hold in a separate lawsuit.  However, this hold only covered two of the three dates the Plaintiffs sought in Discovery. 

The Court ordered the back-up tapes sampled for the names of specific individuals on the available date ranges.  While not wadding into the issue of search terms in any depth, the Court ordered the terms to include first names, abbreviated first names and last names.  Patterson, 17-18. 

The situation in Patterson v. Goodyear Tire & Rubber Co., was entirely avoidable if the parties had not ignored the electronically stored information in the case.  Electronically Stored Information is not something you ignore to the last minute.  Parties are finding themselves having multiple conferences to agree on search terms, meetings with clients on sources of ESI and time with consultants to determine best practices for collection and processing.  There are many issues to be aware of when dealing with electronically stored information.  Procrastinating is really a bad plan.

Status Messages and Client Confidences

Web 2.0 marketing is a highly effective way for lawyers to promote their services to prospective clients.  Web 2.0 marketing is leveraging collaborative programs hosted over the Internet, such as social networking sites or Wikis, to provide content highlighting an attorney’s services.  This form of marketing could also result in disaster if used incorrectly. 

Client Confidences: The Work Product Doctrine and the Attorney Client Privilege

The sailor in me remembers Hickman v Taylor 329 U.S. 495 (U.S. 1947) because it had a tug boat that sank.  The lawyer in me remembers it for the Work Product Doctrine.

 

For those not familiar with the Work Product Doctrine, the Doctrine protects documents prepared in anticipation of litigation from discovery, including mental impressions, conclusions, opinions, or a lawyer’s legal theories.  Chemtech Royalty Assocs., L.P. v. United States, 2009 U.S. Dist. LEXIS 27696 (M.D. La. Mar. 30, 2009).  The Work Product Doctrine is codified by Federal Rule of Civil Procedure 26(b)(3).  The Doctrine covers material prepared by a party and a party’s representative, which includes lawyers, consultants or agents.  In re CV Therapeutics, Inc. Sec. Litig., 2006 U.S. Dist. LEXIS 41568 (N.D. Cal. June 16, 2006), citing FRCP 26(b)(3). 

The Attorney Client Privilege is a different concept.  The Attorney Client Privilege protects “confidential disclosures made by a client to an attorney in order to obtain legal advice, as well as an attorney’s advice in response to such disclosures.”  In re CV Therapeutics, Inc. Sec. Litig., 2006 U.S. Dist. LEXIS 41568 (N.D. Cal. June 16, 2006), (citations omitted).  Additionally, the privilege applies “only [to] those disclosures — necessary to obtain informed legal advice — which might not have been made absent the privilege.” Id.

California law also requires a lawyer to, “…maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client.”  Cal Bus & Prof Code § 6068

Additionally, attorneys should realize they are responsible for their staff, consultants, non-lawyers, and others also using technology. ABA Model Rule of Professional Conduct, Rule 5.1, Rule 5.2 and Rule 5.3 outline these responsibilities.

Enter Web 2.0 Marketing

There is the potential for disclosure of information protected by both the Work Product Doctrine and the Attorney Client Privilege on social networking sites such as Twitter or Facebook.  These services are popular Web 2.0 sites where users can create public profiles, invite other users to follow their daily updates, micro-blogging and other information sharing.  It does not take much to imagine someone new to Web 2.0 marketing disclosing too much information to their “friends” or “followers.”

Here is how the risk of disclosure is possible: a Facebook user posts a status message they deem harmless, such as “I just landed ‘Company A’ as a client and have a bunch of back-up tapes to restore.”

Does this disclose any mental impressions or strategy about the case?  Probably not, but it is flirting with disclosure.  Moreover, Company A would probably not be thrilled with their lawyer announcing their actions in a lawsuit to 300 “friends.”

After reviewing data from imaged hard drives, the same individual posts the status message, “Wow, they really blew preserving their emails.” 

If the client is somehow identifiable, there is a problem, because a mental impression of the client’s ESI is being disclosed.  While the “friends” are probably in no way related to anyone in a lawsuit, disclosing a client confidence to one person is one too many. 

This Does Not Mean Don’t Market!

This is only a call to action for common sense.  Lawyers, consultants and their agents should exercise reasonable care in promoting their services.  A status message of “Working on a Summary Judgment Motion” or “Preparing for the CMC” or “I settled the case!” is not disclosing any legal theory or confidence.  Moreover, using Facebook with the JDSupa application to show published documents can be very effective marketing.  However, saying a client name, plus a specific argument or confidence in a status message, might put a tech savvy lawyer in hot water. 

Web 2.0 empowers lawyers to promote their services and demonstrate their knowledge in ways few people could imagine when Silicon Valley engineers were teenagers building computers in the 1970s.  Lawyers marketing their services on Facebook, Twitter and other social networking sites should exercise reasonable care to protect client confidences.  While this may seem like stating the obvious, the potential for someone saying too much in a status message is very real.

Prescription for Spoliation: A Short Legal Review

Two drug companies in litigation ended up in a legal brawl over spoliation of backup tapes.  The Defendants claimed the Plaintiffs either intentionally or recklessly destroyed back up tapes with key email messages that tended to show the Plaintiffs’ drug “escitalopram” did not produce “unexpected results” and therefore was “obvious.” Forest Labs. v. Caraco Pharm. Labs., 2009 U.S. Dist. LEXIS 31555, 2-3 ( E.D. Mich. Apr. 14, 2009).

The Defendant’s “Spoliation Motion” sought the following:

(1) “[A] one-day hearing to create a record of Forest’s spoliation of evidence,”

(2) “Forbid Forest from claiming at trial that escitalopram produced unexpected results (and thus was not ‘obvious’),” and

(3) “Require Forest to pay Caraco’s attorney fees.” Forest Labs. 3-4.

Defining the Law:

The Court conducted an extensive review of the facts and law regarding the spoliation of electronically stored information.  This is a thoughtful and detailed case addressing spoliation, triggering dates for the duty to preserve and adverse inference instructions.  Relevant sections are summarized below.

Spoliation Defined:  

“Spoliation is the destruction or significant alteration of evidence, or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.” Forest Labs. 3-4, citing West v. Goodyear Tire & Rubber Co., 167 F.3d 776, 779 (2d Cir. 1999).

Spoliation is a rule of evidence and is “administered at the discretion of the trial court.”  Forest Labs. 3-4, citing Hodge v. Wal-Mart Stores, Inc., 360 F.3d 446, 450 (4th Cir. 2004) (quoting Vodusek v. Bayliner Marine Corp., 71 F.3d 148, 155 (4th Cir. 1995)).

Standards for Adverse Inference Instruction:

To establish an adverse inference instruction for the destruction of evidence, the moving party must show the following:

(1) That the party having control over the evidence had a duty to preserve it at the time it was destroyed;

(2) That the records were destroyed “with a culpable state of mind”; and

(3) That the destroyed evidence was “relevant” to the party’s claim or defense such that a reasonable trier of fact could find that it would support that claim or defense. Forest Labs. 5.

Step 1: Failure to Preserve Evidence

A moving party has to show the non-moving party had a duty to preserve the evidence at the time it was destroyed.  This requires determining the “trigger date” to preserve evidence.  Forest Labs. 9.  As the Court summarized:  

“Any destruction of potentially relevant evidence that occurs before the trigger date would be harmless, since the party was unaware of a need to safeguard evidence. The destruction of documents and evidence after the trigger date, however, is not allowed.” Forest Labs, 9, citing Clark Constr. Group, Inc. v. City of Memphis, 229 F.R.D. 131, 136 (W.D. Tenn. 2005).

The focus of the legal brawl was over backup tapes, whether they were accessible or not, whether there was a duty to preserve them and when the duty began.  As a general rule, a party does not have to save “everything.”  Forest Labs, 10-11.  However, “[a] party or anticipated party must retain all relevant documents (but not multiple identical copies) in existence at the time the duty to preserve attaches, and any relevant documents created thereafter.”  Forest Labs, 11. 

The Court found the backup tapes were not reasonably accessible, largely because the Defendants did nothing to rebut Plaintiffs’ arguments the tapes were for disaster recovery and thus inaccessible.  Forest Labs, 13.

However, this does not outright mean the inaccessible back up tapes were not subject to preservation.  The “Zubulake Exception” states:

If a company can identify where particular employee documents are stored on backup tapes, then the tapes storing the documents of “key players” to the existing or threatened litigation should be preserved if the information contained on those tapes is not otherwise available. This exception applies to all backup tapes.  Forest Labs, 14-15, citations omitted. 

Step 2: State of Mind

The failure to produce evidence falls on a “continuum” of degrees from “negligence to intentionality.” Forest Labs. 16-17, citations omitted.  However, once there is a duty to preserve, “any destruction of [evidence] is, at a minimum, negligent.”  Forest Labs. 17, citing Zubulake, 220 F.R.D. at 220. 

Case law defines three possible states of mind for culpability:  (1) Bad faith destruction, (2) Gross negligence, and (3) Ordinary negligence.” Forest Labs. 17, citing Sampson v. City of Cambridge, Md., 251 F.R.D. 172, 179 (D. Md. 2008).

Some courts have found negligence is enough to meet the state of mind requirement.  Forest Labs. 17.  One prior court stated:

[The] sanction [of an adverse inference] should be available even for the negligent destruction of documents if that is necessary to further the remedial purpose of the inference. It makes little difference to the party victimized by the destruction of evidence whether that act was done willfully or negligently. The adverse inference provides the necessary mechanism for restoring the evidentiary balance. The inference is adverse to the destroyer not because of any finding of moral culpability, but because the risk that the evidence would have been detrimental rather than favorable should fall on the party responsible for its loss. Forest Labs. 17-18, citing Turner v. Hudson Transit Lines, Inc., 142 F.R.D. 68, 75 (S.D.N.Y.1991).

Step 3: Destroyed Evidence was Relevant to a Claim or Defense

The “prejudiced party” has to show some evidence that the destroyed documents (or ESI) was relevant “to substantiating his claim would have been included among the destroyed files.'” Forest Labs, 20, citing Byrnie v. Town of Cromwell Bd. of Educ., 243 F.3d 93 at 108 (2d Cir. 2001).  As the Court explained:

 “[R]elevant” in this context means something more than sufficiently probative to satisfy Rule 401 of the Federal Rules of Evidence. Rather, the party seeking an adverse inference must adduce sufficient evidence from which a reasonable trier of fact could infer that “the destroyed [or unavailable] evidence would have been of the nature alleged by the party affected by its destruction.” Forest Labs, 20, citing Byrnie, 243 F.3d at 110.

Application to the Facts

The Court found the Plaintiffs had a duty to preserve evidence beginning in August 2003.  This was the timeframe when the Plaintiffs were on notice that an Abbreviated New Drug Application had been filed, which was a “triggering event” for potential litigation.  Forest Labs, 7-8. 

The Court ordered a two part spoliation hearing to determine 1) whether the “Zubulake” exception applied and 2) determine if the Plaintiffs had a culpable state of mind and whether the spoliated evidence is relevant.  Forest Labs, 21-22.

The “Zubulake Exception” is threefold analysis to determine whether:

(1) “The information contained on [the] tapes” is “otherwise available,”

(2) The alleged spoliator can “identify where particular employee documents are stored on the backup tapes,” and

(3) The tapes “store the documents of ‘key players’ to the . . . litigation. Forest Labs, 22, Zubulake, 220 F.R.D. at 218.

 This case is not over and I will be interested to see what happens next.

When Contract Law Collides with Social Networking & Online Movie Rentals

Every now and then, there comes a case that gives me law school flashbacks.  Professor Rohwer, my old Contracts professor, this one’s for you. 

Harris v. Blockbuster, 2009 U.S. Dist. LEXIS 31531 (N.D. Tex. Apr. 15, 2009) involves Blockbuster allegedly violating the Video Privacy Protection Act.  Blockbuster Online (an online video rental service) entered into a contract with Facebook that caused rental information for Facebook-Blockbuster Online users to be published to all of the users’ Facebook friends via Facebook’s Beacon application.  Harris, 1-2. 

The Plaintiffs apparently did not like their rental history being broadcast to their Facebook friends. 

The Plaintiffs claimed Blockbuster Online violated the Video Privacy Protection Act. The VPP prohibits a video service provider from disclosing a customer’s personally identifiable information without their written consent.  The VPP Act allows for liquidated damages of $ 2,500 for each violation.  Harris, 2.

The Defendants invoked a binding arbitration provision, pursuant to the contractual “Terms and Conditions.”  The Terms and Conditions were a “clickwrap” style agreement, which included binding arbitration and a waiver of any class action litigation against Blockbuster.  Harris, 4. The online contract stated, in relevant part:

Blockbuster may at any time, and at its sole discretion, modify these Terms and Conditions of Use, including without limitation the Privacy Policy, with or without notice. Such modifications will be effective immediately upon posting.

The issue before the Court was whether the online contract “Terms and Conditions” were illusory and thus unenforceable.  Harris, 3-4.  The Court found the online contract illusory. 

For those flashing back to first year Contracts, a contract must be supported by consideration, where something of value (such as a peppercorn) is received by a promisor from a promisee.  Black’s Law Dictionary.  If there is no consideration, the contract is illusory and unenforceable.  Harris, 4 and Black’s Law Dictionary.

The crux of the Plaintiffs’ arguments were that since Blockbuster reserved the right to modify the Terms and Conditions at their “sole discretion” at “any time” to be effective immediately on their site, the contract was thus illusory.  Harris, 6-7. 

The Court found the contract was illusory because Blockbuster had the power to unilaterally change the contract whenever they wanted to do so. The only “limit” was the new terms would not be effective until posted online.  Harris, 6-7. 

Online “clickwrap” agreements can include forum selection clauses, choice of law provisions and other “unilateral” agreements.  The issue of illusory contracts will continue to be litigated and will probably be the topics of future Contracts hornbooks.

This case also raises an interesting question: just what will the discovery look like?  Will the Plaintiffs produce screen shots of their published movie rental history to show their injury?  Will the Plaintiffs request databases from the Defendants?  These sorts of questions will continue to come up as Web 2.0 litigation continues.

Check Please: Challenging a PDF Form of Production

Rahman v. Smith & Wollensky Rest. Group, Inc., is an employment discrimination case where the Defendants produced guest checks from a database in PDF format on CD-ROM, in three-year batches, with a unique index number identifying each check.  Rahman v. Smith & Wollensky Rest. Group, Inc., 2009 U.S. Dist. LEXIS 30275, 10 (S.D.N.Y. Mar. 18, 2009). 

The Plaintiffs claimed the production was done in an “unsequential, jumbled up manner.” Rahman, 10 (S.D.N.Y. Mar. 18, 2009).  Additionally, the Plaintiffs’ expert claimed the PDF format would make the analysis of the data “extraordinarily time consuming and expensive.” Rahman 11.

The Court did not see a “jumbled” production or anything wrong with producing in PDF format. 

Plaintiffs’ arguments failed for several reasons. First, the Court did not find the production to be an unorganized “document dump.”  Secondly, there was no evidence the Plaintiffs specified the form of production in their discovery request. The Court stated, “Without specific instructions otherwise, pdf format — a familiar format for electronic files that is easily accessible on most computers — is presumptively a ‘reasonably usable form.'” Rahman, 13.

The Court quickly torpedoed the expert’s claimed production inefficiencies.  The Defendant had produced “over one hundred thousand checks that showed a waiter’s name, table assignment, and tips.”  Rahman, 14. This information, coupled with the other document produced, should have enabled the economic expert to perform any required analysis for the Plaintiff’s claims.  Id.

PDF productions are perfectly acceptable if a requesting party does not specify the form of production.  Rahman, 13, citing, Autotech Technologies Ltd. v. Automationdirect.com, Inc., 248 F.R.D. 556, 559-60 (N.D. Ill. 2008) (Documents produced in pdf and tiff format complied with Federal Rule of Civil Procedure 34 where the requesting party failed to specify the form of production ).

The Plaintiff might have had a better argument if the checks were searchable ESI that had been converted to non-searchable PDFs.  Case law and the Federal Rules of Civil Procedure Advisory notes prohibit converting ESI that is in searchable form into a non-searchable form.  In re Payment Card Interchange Fee, Slip Copy, 1007 WL 121426 (E.D.N.Y.),  4, citing Fed.R.Civ.P. 34(b), 2006 Amendment, Advisory Committee’s Note.  However, the opinion makes no mention of extracted text or whether the PDFs were searchable.

Spinning the Spoliation Record (OR, Download MP3 Sanctions)

I watched David Boies argue the original Napster case on CSPAN while taking Computer and Internet Law at McGeorge, University of the Pacific.  David Boies is more remembered for later representing Vice President Al Gore in the Bush v Gore legal saga.

Online music downloads have caused litigation with the click of the mouse since the days of Napster in the 1990s.  Arista Records LLC v. Usenet.com, Inc., 2009 U.S. Dist. LEXIS 5185 (S.D.N.Y. Jan. 26, 2009) continues the story of the music industry suing for copyright infringement. 

Arista Records LLC v. Usenet.com, Inc. is a tale of sanctions and music downloads. The Defendants operated Usenet.com, which is network message board that predates the Internet.  Arista Records, 4-5. The Defendants charged subscribers a monthly fee effectively for file sharing.  The Plaintiff music industry claimed the Defendants provided Usenet subscribers access to music piracy groups containing copyrighted digital music files. Arista Records, 7.  The discovery requests at issues included the Music Groups, Digital Music Files and promotion material on the Defendants’ website.

 The Plaintiffs claimed the Defendants deliberately destroyed evidence of the Music Groups, Digital Music Files and website information, thus claiming spoliation for the following:

 1) “Usage Data,” which Plaintiffs defined as “pre-existing records from Defendants’ computer servers reflecting actual requests by Defendants’ paid subscribers to download and upload digital music files using Defendants’ service;”

2) “Digital Music Files,” which Plaintiffs define as “the physical digital copies of the copyrighted sound recordings at issue in this case and related information hosted on computer servers operated by or on behalf of Defendants”; and

3) “Highly incriminating promotional materials previously available on the Usenet.com website.”  Arista Records, 8.

The chronologies of facts outlining Plaintiffs’ claims are technical and detailed.  The following outline is created from the Court’s opinion:

August 2007: Plaintiffs first sent a written notice of copyright infringement. 

The Defendants did not respond to the written notice.

October 12, 2007: Plaintiff sues Defendants.

January 2008: Plaintiff Rule 34 requests specifically for the Usage Data.

February to March 2008: Plaintiff attempted to acquire data through correspondence with Defendant

March 8, 2008: Defendants agreed data was relevant and to produce “snapshots.”  Arista Records, 9-10.

During a period of only days in March 2008, the Defendants disabled the music groups subject to the discovery requests.  The Plaintiffs challenged this action and demanded the Digital Music Files be preserved.  The Defendants represented the music files had been preserved.  Arista Records, 12-13.

The Plaintiffs claimed the Defendants reconfigured their system in order to write-over the Digital Music Files.  Additionally, the Plaintiffs represented to the Court that only 78 of the 900 Music Groups had been reactivated.  Arista Records, 13.

 The Defendants went to the extreme of removing all references to “Music” and “mp3s” from a promotional webpage. The Court noted the “Defendants destroyed all copies of this webpage, and only produced the sanitized version of it to Plaintiffs during discovery.” Arista Records, 79-80.

The Court found the Defendants’ production was in bad faith and sanctioned the Defendants with an adverse inference instruction for their discovery violations.  Arista Records, 78-80.  The Court based the sanction order on the fact the Defendants had an obligation to preserve and produce the following ESI:

Useage Data and Digital Music Files.   Arista Records, 61-62.

Images from the website.  Arista Records, 64.

Promotional materials from the website.  Arista Records, 79-80.

The Defendants argued that they could not preserve data on their serves because it was transitory in nature without any sort of back-up.  Arista Records, 68.  This argument was flatly rejected, because the Defendants had produced some of the “transitory” Usage Data and Digital Music Files to Plaintiffs.  Id.

What are the lessons learned from this case?  First, don’t go around destroying ESI that is relevant to a lawsuit or subject to a discovery request.  Arista Records has many examples of bad faith behavior with willful acts to remove user group information, digital music files and website information.  Additionally, a party’s duty to preserve and produce electronically stored information does not allow for unethical gamesmanship. 

The other big lesson: Music downloads and piracy has been the subject of litigation for over a decade and will not likely cease anytime soon.