Can Retaining Liens Attach to eDiscovery Databases?

Recovering attorney’s fees and costs is one of the more unpleasant aspects of the practice of law. In situations where an attorney has not been paid, a retaining lien gives “the attorney the right to retain possession of the client’s documents and files which come into the attorney’s hands during the course of employment until the balance due for the attorney’s services is paid.” Cronin & Co., Ltd. v Richie Capital Mgmt., LLC, 2014 IL App (1st) 131892-U, ¶¶ 21-32 [2014], citing In re Liquidation of Coronet Insurance Co., 298 Ill. App. 3d 411, 415, 698 N.E.2d 598, 232 Ill. Dec. 507 (1998).

An attorney has to be in continued possession of the client’s property in order to maintain the lien. Id.

Future-Review

Can a retaining lien be held over client data in an online review application hosted by a service provider?

The answer appears to be yes.

While the case facts are substantially detailed, here are the basic events: Attorney is retained as counsel and the attorney retained an eDiscovery service provider to host client files for review. The service provider was contracted to work for the clients, however, it took created the database and took directions from the attorney, thus imputing control to the law firm. Cronin & Co., Ltd., P22-23.

The fact the client information was given to the service provider for hosting did not mean the attorney surrendered possession of that information, which would have destroyed the retaining lien. Cronin & Co., Ltd., P23.

As one can imagine, most lawsuits do not have issues with retaining liens unless there is a dispute. The short story of what happened is representation ended, there was a dispute,  and the attorney sought the client information from the service provider. This put the service provider into a very unpleasant situation on what to do, where the attorney sought injunctive relief to have the client information retained to the lawyer (the facts in the opinion are very detailed, so this is an abridged version).

Whether or not the District Court abused its discretion in granting a temporary restraining order or preliminary injunction was a large part of the case analysis in ordering the service provider to turn the database over to the attorney. The Court vacated and remanded with instructions for the District Court to enter findings the preliminary injunction factors in regards to the balancing of hardships. Cronin & Co., Ltd., P31.

Bow Tie Thoughts

Disputes over fees with clients are not fun. The idea of being a service provider stuck in the middle of a fight between a client and an attorney is extremely undesirable.

I discussed with an attorney who represented a service provider in a fee dispute over hosting fees against a law firm. The lawyer had a novel concept of arguing the work product doctrine did not apply to the attorney work product in the database because his client’s agreement with the law firm was vague, thus they would seek a lien on the server with the client data and attorney work product, and then sell the information to the opposing party in the lawsuit.

This was the single worst idea for conflict resolution I have ever heard. No lawyer would ever work with a service provider that argued work product was not protected by the work product doctrine. Moreover, the idea of selling client information and attorney work product would ensure a service provider is forever on every law firm’s black list in the country. Such tactics would likely violate ethical rules of conduct, the Stored Communication Act, plus possibly other laws.

The current case is extremely different. It will be interesting to see the balancing of hardship analysis on remand.

Forensically Examining A Lawyer’s Computer

In a dispute over a will and deed transfer, a New York State Court ordered the examination of a lawyer’s computer.

The idea of an attorney’s computer being searched by third parties should scare lawyers to death.

The attorney objected on the grounds the examination would violate the attorney-client privilege and work-product doctrine for all of the attorney’s other clients.

The Court was also concerned about privilege issues and ordered the following examination:

The computer forensic examiner was directed to review the computer only for documents that refer to Rose Tilimbo and it must not examine files which would not likely lead to the discovery of evidence related to Rose Tilimbo.

In the event the forensic examiner inadvertently examined any information that was not related to Rose it is directed to immediately cease the examination of that file.

In the event that forensic examiner located documents that refer directly to Rose Tilimbo or appear to be related to the purported will or the alleged deed transfer, those documents shall be mailed to the parties’ attorneys.

The attorneys would have 14 days from the receipt of documents to object to disclosure to the movants by notifying counsel for the movants that he is objecting and sending the documents to the court for an in camera inspection together with the reasons for the objection.

In the event that no objections are made to the production of the documents or the court rules that the documents are to be disclosed the computer forensic examiner may thereafter submit the documents to movants’ counsel.

Matter of Tilimbo v. Posimato, 2012 N.Y. Misc. LEXIS 4027, at *13-14 (N.Y. Sur. Ct. Aug. 22, 2012) (Emphases added).

Bow Tie Thoughts

It is very good to see a state court judge address the privilege issues of how to examine a lawyer’s computer.

If you ask three different computer forensic examiners how they would comply with the Court Order, you would probably have three different answers. The right approach will depend on how data is stored and multiple other factors best left to the experts.

One option is to make a “mirror image” of the computer and then search for responsive data. This is likely the least desirable for the attorney, because the entire contents of his computer have now been copied and are in the hands of a third-party. Short of a protective order and the computer experts acting as court-appointed neutral examiners who return or destroy the mirror image at the end of the examination, this is least desirable from an attorney’s perspective.

There is software available where the attorney could effectively self-collect his client files. While this might provide the most piece of mind to the attorney, it likely causes the most stress for the requesting party. It also raises issues of how searches were conducted and can easily cast doubt on the adequacy of the collection.

Another option is for a targeted collection of the attorney’s hard drive. This might take more time then doing a mirror image of the hard drive, but provides more piece of mind to the attorney. The collection is based on search terms devised by the computer forensic expert and attorneys to specifically identify the relevant information. This conceptually is a good middle ground approach to both preserve the parties’ interests and the confidentiality of the attorney’s clients.

Instead of the computer forensic examiner “mailing” documents to the attorneys, a hosted repository is an option the parties and court should consider. The producing party could first review the responsive information for any privileged ESI, creating all the necessary information for a privilege log right in the database. The requesting party could then perform its own review and note any challenges to any asserted privileges. The Court itself could then review the information “in camera” and rule on any privilege issues without protracted motion practice.

Going Dutch on eDiscovery: Hosted Review Agreement Trumps Prevailing Party Cost-Shifting

In a patent dispute, the parties agreed to use a online review platform for the production of email and to share the costs.  The prevailing party in the lawsuit won on having their hosting costs of $234,702.43 shifted to the opposing party.  The losing party appealed and the Court of Appeals reversed the cost-shifting award. Synopsys, Inc. v. Ricoh Co. (In re Ricoh Co.), 2011 U.S. App. LEXIS 23495, 9-12 (Fed. Cir. Nov. 23, 2011).

The use of the online review database was born out of a production dispute.  The Producing Party initially proposed producing email messages as 1) a hard copy production of the e-mails; 2) converting them to TIFF format, or 3) loading them onto a local terminal at its offices and allowing the Requesting Party counsel to review them on site only. In re Ricoh Co., at *5.

The Requesting Party [very rightly] objected to the Producing Party’s form of production proposals and sought the email produced in native file format.  In re Ricoh Co., at *5.

The Requesting Party recommended a hosted review provider and to divide the hosting costs between the litigants.  In re Ricoh Co., at *5-6.

After the conclusion of the lawsuit, the Producing Party argued that because the hosted review platform was used for the email production, the full hosting costs were taxable.  In re Ricoh Co., at *6.

The Court agreed that the use of the online review platform was taxable under 28 U.S.C. 1920(4), because the “database was used as a means of document production in this case.” In re Ricoh Co., at *7.

However, there was a very BIG however: the joint contract with the hosted service provider that contained a cost-sharing provision.

The Court cited to a case from 1975, which held that it was “proper” to “exclude from costs awarded certain charges because ‘[t]he parties had agreed to share the expense for [that] service.'” In re Ricoh Co., at *10, citing Thomas v. Duralite Co., 524 F.2d 577, 590 (3d Cir. 1975).

The Court of Appeals zeroed in on the 14-page joint hosting contract that included a cost-sharing agreement between the parties.  In re Ricoh Co., at *11.  As the Court of Appeals stated:

The parties characterized this agreement as a cost-sharing agreement, but never indicated that the cost-sharing was only temporary. Communications between the parties after the agreement with Stratify was executed continued to reflect the cost-sharing agreement.

There is no indication in any of the extensive communications between the parties that they intended this cost-sharing agreement to be anything other than a final settlement of the cost of the Stratify database.

 If the cost-sharing agreement were designed to be only an interim agreement, it seems likely that there would have been some indication to that effect in either the communications between counsel or the agreement with Stratify. Under these circumstances, the parties’ agreement is best interpreted as agreeing to a final, not an interim, sharing of costs.

In re Ricoh Co., at *11-12.

The Court held the hosting agreement was controlling and reversed the award of $234,702.43 for hosting costs.

Bow Tie Thoughts

It is good that courts recognize hosting fees for an online review platform as recoverable costs.  This opinion puts parties and service providers on notice to watch out for the terms in a shared hosting agreement.  If there is a possibility a party may seek costs for a shared hosted review database, a clause should be put into the agreement about cost-shifting for a prevailing party.  This should be a Rule 26(f) meet and confer topic if a shared-hosting platform is being considered.

Online review databases have many benefits.  In large multi-party lawsuits, the volume of ESI to review is often too large for a law firm to maintain.  Having the data hosted by a third-party allows the law firm to focus on the subject matter of the case, opposed to investing in both the hardware, software and expertise to effectively set-up the discovery for review.

Large law firms are not the only ones using online review software.

Hosted solutions can also allow judges to have access to the discovery if the case so requires.  In El-Amin v. George Wash. Univ., 2008 U.S. Dist. LEXIS 85009 (D.D.C. Oct. 22, 2008), Judge Facciola ordered the parties to consider using a hosted review platform that could “easily used by counsel and by the Court.”  For more, see Court Orders For Hosted Review Solutions: When the Judge Wants to See the Discovery Too.

Highlighting the advantages of an online review platform, Access Data has been very gracious to host my high school mock trial team’s fictional case in Case Vantage.

The students are using Case Vantage to review the witness statements; identify facts supporting the causes of actions/defenses; recognize evidentiary issues; determine hearsay objections and the corresponding hearsay exceptions. Issue codes were created for the different charges against the fictional defendant based on the assigned jury instructions.

The students are also posting outlines of their pre-trial arguments, opening statements, closing arguments, and witness examinations for me to review online.

Whether an online review platform is being used in a complex case subject to a protective order or by high school students learning how to build a case, there are many advantages to using online hosted review.

Court Orders For Hosted Review Solutions: When the Judge Wants to See the Discovery Too

movingtruckFunny thing about discovery: Sometimes, the Judge needs to see the electronically stored information too. 

However, most judges will not want a lawyer to swing by in a truck to drop off 80 bankers boxes of printed email and spreadsheets at the courthouse. 

 It is also unlikely many Courts can afford purchasing litigation support software.  In these situations a web hosted review platform can be the solution. 

For those not familiar with them, a hosted litigation support solution is a database hosted online by a third party for a law firm or multiple firms.  This could be a firm with a very large case or multi-party litigation.  Each party can have its own secure log in passwords and not have access to their opponents’ work product. 

kcura-docreview

Magistrate Judge Facciola issued a discovery order that required the parties to consider using a hosted review platform.  The order set out as a “primary goal” for the parties to select a review platform with “hyper-linked to fields in a database that will permit the instantaneous retrieval from within the database of the information offered by plaintiffs in support of any factual proposition.”  El-Amin v. George Wash. Univ., 2008 U.S. Dist. LEXIS 85009 (D.D.C. Oct. 22, 2008).

 The Court set out three secondary goals:

  • A. The review software had to be easily used by counsel and by the Court.
  • B. The Court needed access to the review software.
  • C. The review software needed to be self-contained. El-Amin v. George Wash. Univ., 2.

 The Court even went so far as draft a six column database as an example for the parties. El-Amin v. George Wash. Univ., 2.

Claim Dr. Date Plaintiff’s Defendant’s objection Court’s ruling
No.     evidence in and any countering  
      support evidence  
123 Smith 10/02/01 Document or Counter argument why Claim
      testimony evidence is insufficient; sustained or
        tender of countering denied, with
        evidence with reason
        explanation  

Judges are judges because they are educated problem solvers.  It is not hard to imagine more discovery orders such as El-Amin v. George Wash. Univ.  Courts will face situations requiring all parties to have access to ESI and rulings to be made on objections, privileges or admissibility.  A hosted solution can distribute the costs among the parties and allow a court an opportunity to review the discovery for expedited rulings.  This beats a moving truck full of boxes.