Authored By: Edward J. Piasecki

Citation: Terraphase Engineering, Inc., et al. v. Arcadis, U.S., Inc. U.S. District Court for the Northern District of California

Employee/Employer Implicated: In-House and Outside Counsel

e-Lesson Learned: If counsel inadvertently receives an email containing privileged information, reads it, and fails to notify the sender, counsel may be disqualified.

Tweet This: Finders Keepers? What Not to Do With Inadvertently Received Privileged Information

Ever find something you knew did not belong to you, but kept it anyway? If you have, perhaps you did so under the guidance of the old adage “Finders keepers, losers weepers.” The adage can be applied in a multitude of ways to a variety of things. One of the more humorous situations in which this occurs is via the receipt of an inadvertently sent email. Perhaps a colleague, thinking he was writing to his wife, inadvertently sent you an email about shopping at Bed, Bath, and Beyond. Or perhaps another colleague inadvertently hit reply all to an email belittling his boss. If you have spent anytime in the workplace, scenarios like these are all too familiar. When you receive an email like this, it may be the greatest gift the office humor gods can bestow upon you and it must be opened immediately and maybe even saved to embarrass a colleague at some later date. Finders keepers, losers weepers right? Unfortunately, this is not always so. When legal counsel inadvertently receives an email with privileged information, finders keepers can have dire consequences.

Authored By: Michael Tucker Jr.

Citation: In re TMI Litig., 193 F.3d 613 (3d Cir. 1999)

Employee/Employer Implicated: Plaintiffs’ Counsel

e-Lesson Learned: Continuing non-compliance with expert discovery deadlines can result in the loss of a large and important part of your case. This is especially true when a court sets a drop deadline after a party has repeatedly taken advantage of its leniency.

Tweet This: Court Goes Nuclear on Deadline Desperados

This case arises out of the nuclear reactor accident that occurred at the Three-Mile Island Power Plant on March 28, 1979. This 3rd Circuit decision was rendered more than 20 years after the incident and after a complicated procedural history that included multiple filings by thousands of plaintiffs in both state and federal court. Congressional amendment of a statute finally allowed all of the cases to be consolidated in federal court. The main issue decided on appeal was the district court’s exclusion of expert testimony, based on the gatekeeping standards of Daubert, which restricted plaintiffs’ ability to show that they were exposed to radiation sufficient to cause injury. The other issue on appeal was the award of sanctions for violations of pre-trial discovery requirements and orders. As this is an eDiscovery blog, I will be addressing the discovery and sanctions issues rather than the voluminous and complex scientific matters that arose in this nearly 200 page decision.

Authored By: Jessica K. Rauskolb

Citation: F.T.C. v. First Universal Lending, LLC, 2011 WL 673879 (S.D.Fla.)

Employee/Employer Implicated: Outside Counsel, Miscellaneous

e-Lesson Learned: If you scrub the data off your computers, you can’t blame the other side for destruction of evidence. Your adversary does not have to make sure that you have information to establish your defense.

Tweet This: No Bad Faith? No sanctions. Especially not where the accused party never had control of the later scrubbed PCs

Don’t blame others for your mistakes! If you are given permission by a court appointed receiver to scrub relevant data off your computers to eventually sell them, you can’t blame the other side for spoliation of relevant data that you need to establish your defense - especially not if the other side never had control over the computers with the relevant data! You will not be able to succeed, just ask the defendants in F.T.C. v. First Universal Lending, LLC. In F.T.C. v. First Universal Lending, the F.T.C. investigated the defendants for their mortgage modification practices by alleging that defendants had violated the Federal Trade Commission Act and that defendants had acted in violation of the Telemarketing Sales Rule. For the duration of the investigation, the court appointed a temporary receiver who took control of defendants’ business premises.

Authored By: Michael Paragano

Citation: Cache La Poudre Feeds LLC v. Land O’Lakes, Inc., F.244 R.D. 614 (D. Colo. 2007)

Employee/Employer Implicated: Outside Counsel, Misc. Employee

e-Lesson Learned: The duty to preserve evidence is not necessarily dependent on the tender of a preservation letter, but the duty to preserve must be predicated on something more than just mere discontent.

Tweet This: Be Clear That You Are Suing, and The Other Side Will Have to Preserve!

The duty to preserve evidence is normally triggered by the filing of a lawsuit. However, the duty may arise even earlier when there is a mere “possibility” of a lawsuit. Problems arise because the legal system has grown more and more every day and lawsuits are always a “possibility”. Thus, courts have found that when there is an unequivocal notice of litigation, the party absolutely has a duty to preserve but there must be more than just a mere “possibility” of a lawsuit for the duty to be triggered. Courts will determine when that duty arises based on the facts of each individual case.

Authored By: Gina Barbieri

Citation: Whited v. Motorists Mut. Ins. Co., 2010 WL 3862717 (E.D. Mich. Sept. 28, 2010)

Employee/Employer Implicated: Owners and Corporate Officers

e-Lesson Learned: In cases where extreme tampering with Electronically Stored Information (ESI) is evident, the offending parties’ claims will face dismissal with prejudice.

Tweet This: Destroying Evidence is Self-Destruction (or at least Claim Destruction)

Electronically Stored Information (ESI) is comprised of all of the data held on a computer hard drive. If relevant, it is standard in litigation for the court to order a forensic evaluation of the ESI on a party’s computer during the discovery process. This is particularly true when there is a question as to the authenticity of documents being produced by a party. In this case, an accident left Mr. Whited unable to care for himself. His sister and niece formed Luv-N-Care, LLC, listing Mr. Whited and themselves as the corporate officers of the closely held corporation. The corporation functioned with the sole purpose of providing constant care to Mr. Whited. The payroll for Luv-N-Care was funded by Mr. Whited’s insurance, Motorists Mutual Insurance Company, who was responsible for his care under Michigan’s “no fault” insurance. The legal process was initiated because of a dispute as to the amount of insurance benefits Luv-N-Care was entitled to for their services.

Authored By: Christopher D. Dize

Citation: Oxxford Info. Tech., Ltd. v. Novantas, LLC, 910 N.Y.S.2d 77 (N.Y. App. Div. 2010)

Employee/Employer Implicated: Clients and Attorneys

e-Lesson Learned: If an attorney agrees to return or destroy the other party’s confidential information at the close of litigation, the New York Appellate Division will hold him to it, even if it becomes “too costly” to follow through.

Tweet This: NY Appellate Division Rejects Modification of Confidentiality Order

When counsel for plaintiff Oxxford Information Technology entered into a confidentiality stipulation that all information exchanged during discovery would either be returned to the original party or destroyed, they never imagined that it would be so costly to get rid of the information. After the matter settled, however, Oxxford's counsel learned that they had "inadvertently backed up defendants' information onto numerous back-up tapes to their law firm's computer system." Ironically, it was Oxxford's counsel who had originally demanded the core business secrets that ended up on the tapes.

Authored By: Jessica K. Rauskolb

Citation: In re Grand Jury Subpoenas, 627 F.3d 1143 (9th Cir. Cal. 2010)

Employee/Employer Implicated: Government official, Outside counsel, Miscellaneous

e-Lesson Learned: Non-privileged information originating outside the U.S. that you had to produce as a result of discovery from a civil antitrust suit can get into the hands of a grand jury and be used against you in an antitrust investigation.

Tweet This: Note, discovery in civil litigation can move information within the grasp of the grand jury - and there is nothing you can do about it.

Be careful when you defend a civil suit that was triggered by a government investigation! When you respond to discovery requests and produce material which was previously not within the reach of the grand jury, the government can subpoena these documents! A civil protective order will not do you any good! The defendants in In re Grand Jury Subpoenas had to find that out the hard way.

Authored By: M.J.R.

Citation: Jannx Medical Systems, Inc. v. Methodist Hospitals, Inc., 2010 WL 4789275 (N.D. Ind., Nov. 17, 2010)

Employee/Employer Implicated: Outside Counsel, In-house Counsel, Senior Management, information technology manager

e-Lesson Learned: Discoverable data must be produced in a reasonably usable form in which it is ordinarily maintained and not in a format more difficult for the requesting party to use in litigation.

Tweet This: Indiana Court hands down a harsh punishment for shady electronic discovery practices!

Not only was Jannx scolded by the District Court on three separate issues, they are now responsible for significant legal fees, and lost a motion to protect their own data. It’s safe to say the Indiana District Court was not impressed with the Jannx legal team. Basically, this case involves a dispute over pre-trial discovery motions between the plaintiff, Jannx Medical Systems and defendants, Methodist Hospital, Crothall Healthcare, Inc., and Propoco Professional Services. The Court issued an opinion and order on Defendant’s motion to get Jannx to comply with electronic discovery and Jannx’s motion to withhold electronic data from discovery by reason of trade secrets, etc.

Authored By: Gina Barbieri

Citation: Oxxford Information Technology, Ltd. v. Novantas LLC, 2010 N.Y. App. Div. LEXIS 8496 (N.Y. App. Div. 1st Dep't Nov. 16, 2010).

Employee/Employer Implicated: Owner/Executive, information technology manager, C-level executive, owner, counsel (in-house & outside counsel)

e-Lesson Learned: The best way to protect trade secrets and other discoverable information is through a bargained for confidentiality agreement, which will likely be upheld in its original form

Tweet This: “If you bargain in favor of your privacy, you won’t fall victim to a bait-and-switch”

When confidential business information comes into play, it is imperative that parties diligently bargain to protect their interests. Once an agreement is reached the parties will be expected to uphold their side of the bargain based on the other side’s reliance.

Authored By: Michael Tucker Jr.

Citation: Orbit One Communs. V. Numerex Corp., 2010 U.S. Dist. LEXIS 123633 (S.D.N.Y. 2010)

Employee/Employer Implicated: Information Technology Administrator; Outside Counsel; Owner/Executive

e-Lesson Learned: Mere inadequacy of preservation efforts does not warrant sanctions unless it can be shown that discovery-relevant evidence has been lost. Despite that, it is better to adequately prepare for and execute a proper litigation hold than rely on dumb luck and coincidence to avoid sanctions.

Tweet This: Plaintiff not sanctioned for ESI preservation failures when comprehensive failures did not actually result in lost evidence.

In 2006, Numerex, a satellite communications company, began attempts to acquire Orbit One, which was owned by David Rosen, Scott Rosenzweig and Gary Naden. These negotiations resulted in an asset purchase agreement signed in July 2007, under whose terms Rosen, Rosenzweig, and Naden would continue on with Numerex, with Rosen becoming president of the new division. Around the same time Naden’s former company, Axxon initiated suit against Orbit One and Orbit’s attorneys ordered a litigation hold to ensure preservation of information relating to that controversy.