Discovery Resources

This month’s featured expert:

Joel Bennett, Esq.
Member, Dykema Gossett, PLLC

Background:

Joel Bennett is a member of Dykema Gossett, PLLC, practicing in the firm’s Los Angeles office. His practice focuses on litigation matters. He has substantial experience as lead counsel in jury trials involving antitrust law, intellectual property, sham exceptions to the Noerr-Pennington defense, antitrust/intellectual property interfaces, as well as breach of contract, unfair competition, trade regulation, partnership disputes and real estate matters. Some of his most significant decisions include:

• Workflow Direct, Inc. v. Yellow Pages Directory Services, favorably settled a claim for money owed because of poor service provided
• Militonian v. Adamian, Superior Court, Compton; Jury verdict in favor of our client for breach of contract. Judge Ronald Skyers (2001)
• International Trade Commission Gray Market Cigarette Proceeding, brought by Brown and Williamson (2000)
• Morgan Phillips, Inc. v. Chittenden Eastman, Defendant settled favorably with our client on a business dispute relating to high-end mattresses

Bennett is a frequent author and a member of the following associations:

• American Bar Association
• Association of Business Trial Lawyers
• Los Angeles County Bar Association
• Los Angeles Center for Law & Justice, Board Member

He earned his B.A. and J.D. from the University of Arizona and is admitted to practice in both the states of Arizona and California, as well as in the U.S. Court of Appeals, 9th Circuit; U.S. District Court, Central District of California; U.S. Supreme Court; U.S. District Court, Northern District of Illinois; and U.S. District Court, District of Colorado.

Interview Focus:

The Implications of the Federal Rules of Civil Procedure

Featured Interview:

1. The litigation hold process has long been under scrutiny in the course of litigation. How do the FRCP amendments truly impact how counsel must manage litigation holds?
   
   The amendments to the FRCP effective December 1, 2006, make electronically stored information [”ESI”], discoverable for the first time. FRCP 26(f) is amended to direct the parties to discuss electronically stored information during the discovery-planning conference required by the FRCP. Rule 26(f) is also amended to direct the parties to discuss any issues regarding preservation of discoverable ESI information at the initial conference. Thus, corporations and their counsel must develop a litigation hold policy which, when implemented, suspends routine corporate document destruction and retention procedures. Even more critical counsel now have affirmative duties under both the prior cases and the new rules as follows: Counsel must stop client deletion practices and automatic systems that destroy digital evidence. Unlike paper documents, where doing nothing ensures that information will be preserved, doing nothing with digital evidence can lead to data being lost either intentionally or inadvertently, by deletion, overwriting, or recycling. Computer malfunctions or human errors can also lead to the inadvertent loss of important electronic data. Given the lawyer’s paramount role in preserving evidence, asking the client for detailed systems information such as the following is essential and now required by the new rules:
   • What relevant electronic evidence is in danger of being lost by deletion, overwriting, or recycling?
   • Are the firm’s backup tapes recycled; and, if so, how often?
   • Are massive amounts of old information routinely purged from the system to create space for new files on the system?
   • Are e-mails and other electronically stored information automatically deleted after they reside on the system or individual computers, including ISP accounts, for a set period of time (e.g., 30 days)?
   • Are e-mails stored on a central server or individual desktop or laptop computers?
   • Are computers ever wiped clean and reformatted, such as when an employee leaves the company?
   • Are any IT infrastructure changes, modifications, or upgrades planned for the near future; if so, how will archival data be migrated to the new system?

   The next step is for counsel to ensure that such practices are immediately suspended and to document the steps the client takes in doing so.

2. Which FRCP Rules have the most impact on today’s e-discovery processes?

   Under the new Rule 16(b), attorneys involved in Federal litigation have to meet with opposing counsel [scheduling conference] to consider e-discovery plans within 120 days of the filing of the action. And, at least 21 days before this scheduling conference, the attorneys must meet and attempt to agree upon electronic discovery procedures for the case as set forth in FRCP 26(f). FRCP 16(b)(5) provides that scheduling orders may now contain provisions for “disclosure or discovery” of electronically stored information; New Rule 26(f)(3) provides that discovery conferences now encompass “any issues relating to disclosure or discovery of ESI, including the form in which it will be produced. Revised Rule 34(a) is expanded to include ESI; New Rule 37(f) provides a “safe harbor” procedure for routine business operations resulting in data being erased “as a result of routine good faith operations of an electronic information system.”

3. What steps should counsel take to ensure a defensible litigation hold process?

   Regularly audit client document retention policies to determine if ESI is being either deleted or archived as the policy dictates; Create a protocol to preserve electronic information to be implemented when litigation arises; train relevant personnel including information technology personnel to be witnesses; conduct suspension “fire drills, ” have a litigation hold response team in place, which includes in-house and outside counsel; implement a comprehensive “litigation-hold” program which tells corporate employees when records should be preserved; become familiar with all client’s back-up data systems; and ensure that the litigation hold policy fully covers all ESI including back-up tapes. The following outlines a suggested step-by-step litigation hold checklist:

   • Meet with the client and become familiar with the client’s document retention system and documentary terminology;
   • Identify “key players” and confirm their policies on retention;
   • Meet with IT personnel who can facilitate a litigation hold and assist with document production;
   • Issue a thorough litigation hold to all employees who may have relevant information;
   • Communicate with the client to monitor preservation efforts and periodically reissue litigation holds;
   • Take possession of data or ensure that data is segregated in a safe location; and,
   • Document all the steps taken to preserve discoverable information.
4. How fast does counsel need to act? Why now?

   Once a corporation is either sued or anticipates that a claim may be made, a duty to preserve ESI immediately attaches and the corporation must issue a litigation hold memo to prevent destruction of potential evidence.

   In house and general counsel thus needs to act immediately to implement pre-litigation protocols so that there is a procedure in place implementing a preservation hold policy immediately when the need arises. Counsel needs to anticipate litigation being filed and/or a claim arising against all corporate clients.

   The specific standard on the duty to preserve electronic information is extensively discussed in a series of decisions authored by Judge Shira A. Scheindlin from the U.S. District Court for the Southern District of New York in the matter entitled Zubulake v. UBS Warburg LLC, Civil Action No. 02-1243. In Zubulake IV, Judge Scheindlin found the preservation obligation arises “[o]nce a party reasonably anticipates litigation.” Zubulake IV, 220 f.r.d. AT 218. Judge Scheindlin added that once litigation is reasonably anticipated, a party “must” suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.”

   Other courts have made clear, however, that the standard for instituting a litigation hold does not necessarily arise when a party is notified that a formal complaint is filed; instead the litigation hold obligation arises well before the actual filing and service of the Complaint.

   Several courts have held that once a demand letter is sent, the parties should “reasonably anticipate” litigation and should therefore cease routine destruction of electronic information.

5. What are the risks of not being prepared now? Is there legal precedence already being set under the new FRCP amendments?

   The risks of not being prepared now are massive sanctions against your client and potentially you, the attorney, because of a failure to anticipate and have in place document preservation procedures and litigation hold policies – both pre-litigation and after a claim arise. Although there are no legal precedents yet under the new FRCP amendments, there are numerous precedents under existing law prior to the implementation of the FRCP provisions on December 1, 2006. The risk of not implementing these practices can now result in the imposition of disastrous sanctions. See, for example, United States v. Phillip Morris, 2004 W.L. 1627252(D)(D)(C) 2004 (2.7 Million Dollars monetary sanctions); and Coleman v. Morgan Stanley, 2005 W.L. 674885 (2005) (1.45 Billion Dollar Verdict following adverse inference jury instruction after the Court found that a certification regarding Morgan Stanley’s backup tapes was false when made). Other examples of sanctions for different types of conduct are as follows:

   • Leon v. IDX Systems Corp., 464 F.3d 951 (9th Cir. 2006) – (Plaintiff ran hard drive “wiping” program on business laptop erasing 2,200 files; dismissal of suit as sanction entered).
   • E*Trade Securities LLC v. Deutsche Bank AG, 230 F.R.D. 582 (D. Minn. 2005). (Adverse inference instruction granted for erasure of hard drives and failure to preserve email backup tapes used as archive).
   • 3M Innovative Properties Co. v. Tomar Electronics, 2006 WL 2670038 (D. Minn. 2006). (Adverse inference instruction and deeming certain facts established granted as sanction for failure to establish litigation hold, resulting in loss of emails).
   • Z4 Technologies, Inc. v. Microsoft Corp., 2006 WL 2401099 (E.D. Tex. 2006). (Failure to produce key email, enhanced damages in patent infringement action granted).
   • Zubulake v. UBS Warburg LLCI, 229 F.R.D. 422 (S.D.N.Y. 2004). (Deletions of emails in violation of litigation hold and own records retention policy; adverse inference instruction granted).
   • Optowave Co. Ltd. v. Nikitin, 2006 WL 3231422 (M.D. Fla. 2006). (Adverse inference instruction recommended for reformatting of hard drives, erasing files and emails after notice of litigation received; defendant was computer expert).
   • Ridge Chrysler Jeep, LLC v. Daimler Chrysler Services North America LLC, 2006 WL 2808158 (N.D. III. 2006). (Dismissal sanction based on willful withholding and destruction of electronic records).
     Consolidated Aluminum Corp. v. ALCOLA, Inc., 2006 WL 2583308 (M.D. La. 2006). (Failure to suspend automated email deletion program for litigation hold; negligent failure to preserve; adverse inference instruction denied).

   Obtaining affirmative acknowledgements of counsel’s requests to preserve and an agreement from the client to comply may help protect both counsel and the client from sanctions down the road.

6. Do the FRCP amendments concerning litigation holds also impact actions at the state level? If so, which states are most likely to be following the Federal changes?

   The various States usually follow Federal changes and improvements to the Federal Rules of Civil Procedure. So, we can anticipate that most States, if not all, will do so. California planned on implementing similar procedures but they have been deferred.

Filed under From the Experts.

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