Forensic Discoveries Newsletter - Adopted TN Rules for eDiscovery

EDiscovery Case Law

Court Denies Non-Party's Attempt to "Claw Back" Privileged Documents

SEC v. Badian, 2009 WL 222783 (S.D.N.Y. Jan. 26, 2009).
In this securities litigation, a non-party corporation, Rhino, moved to "claw back" approximately 260 privileged documents allegedly produced inadvertently in 2003. Rhino claimed that language accompanying the production, which certified that production of any document shall not be construed as waiver of any privilege, required the SEC to return the documents. To determine whether privilege was waived, the court analyzed the four factors set forth in Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 104 F.R.D. 103, 105 (S.D.N.Y. 1985): (1) reasonableness of the precautions taken to prevent inadvertent disclosure; (2) time taken to rectify the error; (3) extent of the disclosure; and (4) overarching issues of fairness. Factor one weighed in favor of privilege waiver as Rhino presented no evidence of privilege review prior to the production. Factor two weighed in favor of waiver as Rhino waited five years before it sought to "claw back" some of the production. Factor three also weighed in favor of waiver as the court found 260 documents to be a significant number of documents. The last factor also weighed in favor of waiver as the court was unable to find a reason to disregard Rhino's carelessness. With all four factors weighing in favor of privilege waiver, the court concluded that Rhino waived any privilege it may have asserted on the production.

Court Advises Government Agencies to Be Prepared to Follow Same Discovery Rules as Private Parties

SEC v. Collins & Aikman Corp., 2009 WL 94311 (S.D.N.Y. Jan. 13, 2009).
In this securities fraud litigation, the defendant objected to the SEC's production of 1.7 million documents maintained in thirty-six separate databases. The defendant asserted the SEC produced a "document dump" of unorganized documents and failed to perform adequate searches for e-mails. The SEC argued the production format was in accordance with how the documents were maintained in the usual course of business and that nearly all responsive e-mails would be privileged, protected or non-substantive. Rejecting the SEC's arguments, District Judge Shira A. Scheindlin found that Fed.R.Civ.P. 34's "usual course of business" requirement for production requires the documents to be organized and therefore ordered re-production with documents responding specifically to defendant's requests. Furthermore, as e-mails are inherently searchable, the court found the SEC's blanket refusal to produce any of them to be unacceptable. Accordingly, the court ordered the parties to meet to resolve the scope and design of a search with respect to e-mails. The court noted that a government agency which initiates civil litigation must generally follow the same discovery rules that govern private parties.

Court Declares Patents in Suit Unenforceable Due to Intentional Destruction of Evidence

Micron Tech., Inc. v. Rambus, Inc., 2009 WL 54887 (D. Del. Jan. 9, 2009).
In this patent infringement litigation, the plaintiff sought sanctions claiming the defendant spoliated relevant documents. In 1998, the defendant implemented a document retention policy whereby relevant documents were destroyed. Finding the defendant wa.s an "aggressive competitor," the court determined that litigation was inevitable and reasonably foreseeable since December 1998. Therefore, the court determined that any document destruction following December 1998 was intentional and in bad faith. As the plaintiff established that the documents that were destroyed were discoverable and relevant to the instant litigation, the court concluded that the plaintiff was prejudiced by the defendant's conduct. The court therefore sanctioned the defendant by declaring the patents in suit unenforceable against the plaintiff.

Court Affirms Sanction Order Finding Non-Compliance with Discovery Deadlines

In re Fannie Mae Sec. Litig., 2009 WL 21528 (C.A.D.C. Jan. 6, 2009).
In this litigation, the Office of Federal Housing Enterprise Oversight (OFHEO), a non-party, appealed the district court's order finding it in contempt for failing to comply with a discovery deadline in a stipulated scheduling order. OFHEO argued that the defendant's decision to supply four hundred keyword terms was outside the scope of "appropriate search terms," thereby extending the time needed to comply with its production requirements. However, aware of the deadlines, OFHEO sought several discovery extensions, hired 50 contract attorneys and spent over $6 million � 9% of the agency's entire annual budget � to comply with the defendants' discovery requests. Finding OFHEO's efforts legally insufficient, the court compared its treatment of the discovery deadlines as "movable goal posts" and directed OFHEO to supply documents withheld for privilege that were not logged by the deadline as a sanction for their discovery misconduct. However, the court ruled that any privileged documents that are produced and identified as such will be promptly returned to OFHEO.

Court Imposes Adverse Inference and Strikes Expert Testimony as Spoliation Sanction

Arista Records LLC v. Usenet.com, Inc., 2009 WL 185992 (S.D.N.Y. Jan. 26, 2009).
In this copyright infringement litigation, the plaintiffs moved for sanctions for spoliation. The plaintiffs alleged the defendants deliberately destroyed and failed to preserve highly relevant materials that would have provided evidence of the "wide-scale infringement." The defendants argued that the evidence sought was not relevant to the plaintiffs' claim, the data was transient in nature and their systems did not have the capacity to preserve the data. Regarding the duty to preserve, the court found that the defendants had an obligation to preserve the requested data and defendants' failure to preserve was in bad faith. Therefore, the court imposed an adverse inference against the defendants and awarded attorneys' fees and costs.

Court Orders Third-Party Compliance With Subpoena Despite Allegations of Undue Burden

Viacom Int'l, Inc. v. YouTube, Inc., 22009 WL 102808 (N.D.Cal. Jan. 14, 2009). In this ongoing copyright infringement litigation, the defendants sought documents from a third party via a subpoena duces tecum. (The third party was hired by the plaintiffs to monitor the defendant's website for infringing materials.) The subpoena contained thirteen document requests for documents relating to the third party's relationship with the plaintiffs and its actions with regard to monitoring and identifying infringing materials. The third party objected to the subpoena, arguing it was overly broad and imposed an undue burden. Finding the information sought to be relevant and the economic burden to be lessened due to the plaintiffs' reimbursement of legal expenses, the court overruled the third party's objections and ordered compliance with the subpoena. Additionally, the court ordered the third party to provide privilege logs and an affidavit outlining the response methodology used.

Court Imposes Over $200,000 in Sanctions for Late Production

Keithley v. Homestore.com, Inc., 2009 WL 55953 (N.D.Cal. Jan. 7, 2009).
In this ongoing patent infringement litigation, the defendants sought $391,903.51 in additional sanctions. The sanctions sought were based on two categories: costs the defendants incurred in securing production and costs relating to the use of materials produced late. After considering each specific monetary request, the court awarded a total of $205,507.53 to the defendants: $72,281.71 attributable to depositions costs; $11,606.00 for the costs incurred in preparing the documents for deposition; and $428.83 for subpoena costs. The court also ordered the plaintiffs to pay the lodging expenses incurred during the re-depositions.