E-Discovery Law Alert

E-Discovery Law Alert

Developments in Electronic Discovery and Corporate Information Technology

N.Y. Court Grants Spoliation Sanctions for Destruction of Documents Decades Ago

Posted in Legal Decisions & Court Rules

In Warren v. Amchem Products, Inc., Justice Peter Moulton sanctioned defendant J-M Manufacturing Company for destroying documents in 1990 and 1997 – 24 years and 17 years, respectively, before the Warren Estate filed suit against asbestos manufacturers in 2014. The Court granted plaintiff’s motion for spoliation sanctions and ordered that, should the case proceed to trial, the jury will be instructed that it may infer that the destroyed documents would have supported plaintiff’s claims and would not have supported J-M’s defenses.

In 1990, more than ten boxes of documents (possibly as many as 50) were lost during J-M’s cross-country relocation of its corporate headquarters to Livingston, New Jersey. In 1997, former J-M employee James Reichert testified that he destroyed approximately 27 boxes of records in an effort to free up office space and, as he explained, after moving the boxes several times, “you just get tired of moving stuff.”

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N.Y. High Court Weighs in on Failure to Issue Litigation Hold

Posted in Legal Decisions & Court Rules

In Pegasus Aviation I, Inc. v. Varig Logistica S.A., the New York Court of Appeals held that failure to preserve ESI was simple, not gross, negligence, and remanded to the trial court for a determination of whether the destroyed evidence was relevant to the plaintiff’s claims and what sanction, if any, is appropriate.

In this case, various defendants known as the “MP Defendants” were frozen out of defendant VarigLog’s affairs by certain shareholders. During that time, VarigLog breached aircraft lease agreements with plaintiffs. Before suit was commenced in New York, a Brazillian court granted one of the MP Defendants managerial authority over VarigLog. After suit was filed, the MP Defendant in control failed to issue a litigation hold to VarigLog and, after discovery requests were served, VarigLog suffered two computer crashes that caused it to lose ESI.

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New “Privacy Shield” Agreement Seeks to Resurrect a Safe Harbor for EU-U.S. Data Transfers – Can it Succeed?

Posted in Legal Decisions & Court Rules, Technology Developments & Issues

On February 2, 2016, the EU Commission and U.S. Department of Justice announced the framework of a deal to allow transatlantic data transfers between the EU and U.S. without running afoul of Europe’s strict data protection directives. It was appropriate that the announcement came on Groundhog Day, because we have been here before.

Fifteen years ago, the so called “safe harbor” agreement that was reached appeared to allow companies to transfer data between the EU and U.S. if certain safeguards were established and companies self-certified compliance. That system, while onerous, worked for a while until challenged by privacy groups and ultimately overturned last October by the European Court of Justice in Schrems v. Data Protection Commissioner (Case C-362/14).

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Facebook Hacking Claims Dismissal Motion

Posted in Legal Decisions & Court Rules

Every now and then, a court issues a decision that is as interesting for its facts as it is for the import of its legal holding. The Second Circuit Court of Appeals recently issued such a decision involving application of the respective statutes of limitation for private claims made under the Stored Communications Act (“SCA”) and the Computer Fraud and Abuse Act (“CFAA”).

The facts of Sewell v. Bernadin (decided August 4, 2015) are not complicated. In August 2011, the plaintiff discovered that her AOL email account password had been changed without her permission and she could not gain access to her account. She also discovered that malicious statements regarding her sexual activities had been emailed to some of her private contacts. Then, in February 2012, she found herself unable to log onto her Facebook account, and in March 2012, someone posted malicious statements on her Facebook page. She filed suit in the Eastern District of New York against her ex-boyfriend in January 2014, alleging violations of SCA and CFAA. The District Court dismissed the case in its entirety on statute of limitations grounds, but the Second Circuit recently revived the claims relating to her Facebook account.

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Rule Amendments Update: U.S. Supreme Court Adopts Proposed Amendments

Posted in Legal Decisions & Court Rules

On April 29, 2015, the United States Supreme Court adopted, without changes, the proposed amendments to the Federal Rules of Civil Procedure. (For background information on the proposed amendments, see our previous blog posts from September 25, 2014, June 19, 2014, May 27, 2014, February 10, 2014, and May 6, 2013. Absent action by the United States Congress, the proposed amendments will take effect on December 1, 2015.

A copy of the proposed amendments as adopted by the Supreme Court and submitted to Congress is available here.

New Jersey Attorneys Must Face Ethics Charges for Facebook Friending

Posted in Legal Decisions & Court Rules, Litigation Preparedness & Strategies

On February 3, 2015, the Appellate Division of the New Jersey Superior Court affirmed the dismissal of a complaint two attorneys filed against the Office of Attorney Ethics and its Director (collectively “OAE”) claiming OAE lacked authority to investigate and prosecute ethics grievances against them for “friending” a party to a litigation on Facebook. The Appellate Division’s decision is significant – it affirms OAE’s power to investigate and prosecute alleged ethical violations and demonstrates the potential consequences for attorneys’ improper use of social media in litigation.

The subject attorneys were retained to defend a town and its police sergeant in a personal injury action. One attorney directed his paralegal to conduct Internet research about the plaintiff. The paralegal accessed the public portions of the plaintiff’s Facebook page, and sent the plaintiff a “friend” request without disclosing her association with the attorneys. The plaintiff accepted the friend request, and the paralegal obtained information the attorneys could use to impeach the plaintiff’s personal injury claims.

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SDNY Clarifies Standard for Allowable “Discovery on Discovery”

Posted in Legal Decisions & Court Rules

A requesting party seeking to compel discovery into the producing party’s document collection processes – sometimes called “discovery on discovery” – has always faced an uphill battle. Courts fear allowing discovery to continue indefinitely. Mere suspicion of deficient document production is insufficient; the requestor must proffer an “adequate factual basis” for its belief. Recently, the Southern District of New York found that such a showing is not made where the requestor produced only limited relevant unproduced emails and the requestor did not specify how its requested relief would remedy the alleged discovery defects.

Freedman v. Weatherford International was a securities fraud case. Plaintiffs alleged defendant Weatherford International Ltd. (“Weatherford”) systematically underreported its taxes and issued false financial statements that inflated Weatherford’s earnings. A senior Weatherford employee called the whistleblower hotline, alleging the head of Weatherford’s tax department had engaged in improper practices. In response, Weatherford hired Latham & Watkins (“Latham”) to conduct an independent review. Latham found no evidence of intentional misconduct and reported this to Weatherford’s auditors, Ernst & Young (“E&Y”), who issued a clean audit opinion. Several months later, Weatherford announced it would restate earnings for the third time, leading Weatherford’s Audit Committee to conduct a second independent review, conducted by its own separate outside counsel, Davis Polk & Wardwell, LLP (“Davis”).

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State Bar of California Revises Proposed E-Discovery Ethics Opinion

Posted in Technology Developments & Issues

Attorney competence is currently one of the most-discussed issues in e-discovery. Not surprisingly, much attention has been paid to the proposed ethics opinion issued last year by the State Bar of California that addresses an attorney’s ethical duties in the handling of the discovery of ESI. (See e.g., our previous blog post summarizing topics addressed at the Gibbons Eighth Annual E-Discovery Conference.) In response to several critical comments received during the public comment period, the California Bar’s Standing Committee on Professional Responsibility and Conduct met in December 2014 and issued a revised version of Proposed Formal Opinion Interim No. 11-0004 (ESI and Discovery Requests). The public comment period for the revised version of the proposed opinion ends on April 9, 2015.

The revised opinion is best described as a scaled-back version of the original. For example, the revised opinion limits its analysis to the duties of competence and confidentiality, whereas the original opinion also discussed the duties of candor and not to suppress evidence. Also, the revised opinion eliminates from the factual scenario the more egregiously negligent conduct of the hypothetical attorney that did not necessarily relate to ESI-handling competence. However, the revised opinion adds an extended discussion of an attorney’s obligation to supervise the work of subordinate attorneys and non-attorney employees or agents, such as a client’s IT staff or an outside e-discovery vendor.

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Florida is the Latest State to Allow Attorneys to Advise Clients About the Removal of Social Media Posts and Pictures

Posted in Legal Decisions & Court Rules, Litigation Preparedness & Strategies

On January 23, 2015, the Professional Ethics Committee of the Florida Bar issued an advisory opinion holding that before litigation commences, and absent any other preservation obligation, an attorney may advise a client to: (1) remove information from social media pages and (2) change privacy settings from public to private, as long as the client retains a record of any deleted information or data. In so holding, the Florida ethics committee joined panels from New York, Pennsylvania, and North Carolina that have issued similar guidance.

By way of background, an attorney sought guidance about the ethical implications of advising a client to “clean up” his social media pages before litigation commences to delete “embarrassing” information the attorney deemed immaterial and not directly related to impending litigation. Because the client retained counsel, the ethics committee assumed litigation was “reasonably foreseeable” and, therefore, determined the appropriate inquiry was whether the social media was “relevant,” rather than “related directly” to the underlying litigation. The ethics committee held that relevancy is determined on a factual, case-by-case basis.

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Two Failures to Preserve, Two Starkly Different Results in New York

Posted in Legal Decisions & Court Rules

Two recent spoliation decisions, both out of the same New York Court and issued within a week of each other, demonstrate the potential for starkly different sanctions results depending on the level of culpability of the spoliator.

AJ Holdings Group, LLC, v. IP Holdings, LLC, Index No. 600530/2009 (Sup. Ct. N.Y. County, September 19, 2014) and L&L Painting Co., Inc. v. Odyssey Contracting Corp., 2014 N.Y. Misc. LEXIS 4300 (Sup. Ct. N.Y. County, September 25, 2014) are both breach of contract actions in which plaintiffs were accused of spoliating evidence. In both cases, plaintiffs failed to issue litigation holds after the duty to preserve was triggered and emails from key players were destroyed. That is where the similarities end.

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