A police dispatcher for the City of Laredo claimed the City violated the Stored Communications Act (“SCA”) when it gained access to text messages and images stored on her personal cell phone without her permission. The information discovered on the cell phone resulted in the dispatcher’s termination for violating the police department’s rules and regulations. The Fifth Circuit in Garcia held the SCA did not apply to data stored on plaintiff’s cell phone.

The SCA prohibits the unauthorized access of “a facility through which an electronic communication service is provided.” 18 U.S.C. §2701(a)(1). The Fifth Circuit readily concluded that plaintiff’s personal cell phone was not a “facility” within the meaning the SCA.

The SCA does not define the term “facility,” but the Fifth Circuit in Garcia recognized that prior decisions had applied the Act “to providers of a communication service such as telephone companies, Internet or e-mail service providers, and bulletin board services.” The court in Garcia also noted that United States v. Steiger, 318 F.3d 1039, 1049 (11th Cir. 2003), had addressed whether the SCA could be applied to a hacker who accessed an individual’s computer and obtained information from its hard drive. Steiger held that while the Act might apply when a hacker gains access to an internet service provider, it did not apply when only the victim’s hard drive was accessed to download information.

The Fifth Circuit in Garcia recognized that there are “providers” of electronic communication services as well as “users” of those services, but the SCA’s protection only extends to service providers. It cited with approval Freedom Banc Mortg. Servs., Inc. v. O’Harra, 2012 WL 3862209, *9 (S.D.Ohio Sept. 5, 2012), which explained, “the relevant ‘facilities’ that the SCA is designed to protect are not computers that enable the use of an electronic communication service, but instead are facilities that are operated by electronic communication service providers and used to store and maintain electronic storage.” Thus, the court in Garcia concluded “an individual’s personal cell phone does not provide an electronic communication service just because the device enables use of electronic communication services.”

The Fifth Circuit in Garcia also noted that the Act’s definition of “electronic storage” only encompasses “the information that has been stored by an electronic communication service provider.” Emails and information stored on personal computers do not fit within the Act’s definition of electronic storage. Since no evidence was provided that the City obtained information from the plaintiff’s cellular company or network, the court in Garcia rejected plaintiff’s SCA claim on the additional basis that the information found on the plaintiff’s cell phone did not meet the definition of “electronic storage” within the meaning of the SCA.

Accordingly, a personal device such as smart phone, tablet, or home computer and the data stored thereon is generally not protected by the SCA.

The first is Supreme Court Rule 201(p), which creates a procedure for asserting the protection of attorney-client privilege or the work product doctrine over information inadvertently produced in discovery. The rule is modeled on Fed. R. Civ. Pro. 26(b)(5)(B). The rule specifies that once the party asserting a claim of privilege or work product over inadvertently produced information notifies other parties about that claim, the parties receiving the information must return, sequester or destroy the information and any copies. The rule further provides that any party who received the inadvertently produced information may not use or disclose the information until the privilege or work product issue has been resolved, and must take reasonable steps to retrieve the information then in the possession of any third parties. The rule also permits the party that received the information to promptly present that information under seal to a court for a determination as to whether the privilege or work product protection was waived under the circumstances presented.

The second rule is Illinois Rule of Evidence 502 and is substantially similar to Fed. R. Evid 502. Subsection(a) of the rule addresses the concept of subject matter waiver of attorney-client privilege or work product and limits the concept of subject matter waiver to disclosures made in an Illinois proceeding or to an Illinois office or agency. A subject matter waiver is further limited to the intentional waiver of attorney-client privilege or work product, and the waiver extends only to communications or information concerning the same subject matter which in fairness ought to be considered together.

Subsection(b) of Illinois Rule 502 addresses inadvertent disclosures and essentially adopts an intermediate balancing approach to waiver in this context. The rule provides that an inadvertent disclosure does not constitute a waiver of attorney-client privilege or work product if the disclosing party took reasonable steps to prevent the disclosure and also promptly took reasonable steps to rectify the error.

Subsection(c) addresses disclosures that occur in a federal or another state’s proceedings and specifies that such a disclosure does not constitute a waiver if the disclosure does not constitute a waiver under the law governing the federal or state proceeding in which the disclosure occurred or if it would not be a waiver under this Illinois Rule 502(c) if the disclosure had occurred in an Illinois proceeding.

Subsection (d) of Rule 502 permits a court to enter a non-waiver order. 502(d) provides any disclosure that occurs in the proceeding after the entry of a non-waiver order does not constitute a waiver of attorney-client privilege or work product protection in that proceeding or in any other proceeding.

Subsection (e) provides an agreement between the parties on the effect of a disclosure in an Illinois proceeding (sometimes referred to as a clawback or quickpeek agreement) binds only the parties to the agreement unless the agreement is incorporated into a court order.

Given the protection Illinois Rule 502(d) provides, lawyers should consider seeking a Rule 502(d) non-waiver order in their cases.

Proving once again that it is a “dog-eat-dog world,” plaintiffs’ lawsuit stemmed from a dispute involving a dog-pedigree software program. Plaintiffs developed the software program from information found on the defendants’ web-sites, which plaintiffs claimed was in the public domain. Plaintiffs claimed that defendants subsequently “engaged in a concerted campaign of blast emails and postings on their websites,” which accused plaintiffs of stealing their information and “urging dog enthusiasts to boycott plaintiffs’ products.”

Over six years after plaintiffs filed their original complaint (that is more than 40 years in dog years), defendants filed a motion to dismiss plaintiffs’ seventh amended complaint and sought a stay of discovery. While the court recognized that motions to stay discovery may be appropriate when a claim is patently frivolous, a party raises a potentially dispositive threshold issue such as standing, pending resolution of the defense of qualified immunity, or in some antitrust actions, it refused to enter a discovery stay when the defendants’12(b)(6) motion did not involve or raise those types of issues. The court further observed that because plaintiffs’ claims had been pending for over six years, the motion to stay was unlikely to significantly expedite the ultimate resolution of those claims.

While the court rejected the requested discovery stay, it did explain that the proportionality principles set forth in Rule 26(b)(2)(C)(iii) provide judges with significant flexibility and discretion to limit discovery to insure that the “scope and duration” of discovery is “reasonably proportional” to the needs of the case. The court observed that when a lawsuit “is in its early stages,” phased discovery may be warranted beginning with “relevant information located in the most accessible and least expensive sources.” The court noted that phasing the discovery in this fashion could allow the parties to later determine if more burdensome or expensive discovery is actually required.

Noting that plaintiffs’ claims “have been in constant flux” and that the pending motion to dismiss could alter or limit the scope of discovery, the court directed the parties to engage in a “phased approach” to discovery. The court allowed only written discovery to be served on the named parties and directed that non-party discovery be postponed until a later phase of the case. The parties were further directed to focus their efforts on completing or updating their Rule 26(a) disclosures before proceeding to any other written discovery. The parties were also directed to identify those claims that were most likely to survive the pending motion to dismiss and to concentrate their discovery efforts on those claims. Finally, the court directed the parties to prioritize their efforts by focusing on discovery which was less expensive and burdensome.

To ensure that a phased discovery approach was followed, the parties were directed to meet in person and prepare such a discovery schedule, consistent with the case management procedures outlined in the Seventh Circuit’s Electronic Discovery Pilot Program Principles. The parties were also directed to become familiar with the Sedona Conference Cooperation Proclamation, and to “actively engage in cooperative discussions to facilitate a logical discovery flow.” The court reiterated that under Sedona’s Cooperation Proclamation “[c]ooperation [between attorneys] does not conflict with the advancement of their clients’ interests – it enhances them. Only when lawyers confuse advocacy with adversarial conduct are these twin duties in conflict.”

While Tamburo presents a unique fact pattern, the decision demonstrates how the use of Rule 26(b)’s proportionality principles can potentially limit ediscovery costs. The phased discovery approach taken by the court in Tamburo is one that should be considered when bringing a Rule 12(b)(6) motion to dismiss.

And, when it comes to dogs, always remember: “Never judge a dog’s pedigree by the books he does not chew.” Anonymous.

The sanctions entered in Victory Stanley II, which included a civil contempt finding and potentially up to two years of jail time for egregious ediscovery violations, obscure the decision’s deeper significance. In Victor Stanley II, Judge Paul Grimm establishes the need for uniform federal standards for spoliation sanctions.

In what he described as “the single most egregious example of spoliation” encountered in nearly 14 years on the bench, Judge Grimm concluded that the defendant’s “pervasive and willful” acts of spoliation should be treated as contempt of court. He entered an uncontested default judgment on the plaintiff’s copyright infringement claim, and further directed the defendant be imprisoned for a period not to exceed two years, “unless and until” the defendant pays the plaintiff’s attorneys fees and costs “with respect to all efforts expended throughout the case to demonstrate the nature and extent of the defendant’s spoliation.” Judge Grimm explained that the sanction of civil contempt with the specter of jail time was “absolutely essential” because without it, the defendant would do everything possible to avoid paying any money judgment or fee award entered as a result of the defendant’s discovery misconduct.

The defendant’s misconduct in Victor Stanley II was truly outrageous. It involved repeated instances of successfully deleting or attempting to delete relevant ESI after the entry of several preservation orders and shortly before a forensic examination of the defendant’s computer had been ordered to take place. Judge Grimm concluded the defendant had engaged in “repeated, deliberate measures to prevent the discovery of relevant ESI, clearly act[ed] in bad faith, and in affidavits, depositions, and open court, … nonchalantly lied about what he had done.” He determined that the defendant’s contemptuous conduct had been “established by clear and convincing evidence.”

When have you ever heard of a party acquiescing to the entry of a “consent judgment” on liability and a “consent injunction” on a copyright infringement claim in an attempt to limit the scope of potential discovery sanctions? The defendant unsuccessfully attempted that very strategy in Victor Stanley II. The defendant’s discovery misconduct, however, was so outrageous that the proffer of a judgment on one of the plaintiff’s claims did not prevent the imposition of additional sanctions by the court. The misconduct was so extreme that the plaintiff asked the court to refer the matter to the United States Attorney for possible perjury or criminal charges against the defendant. While Judge Grimm gave serious consideration to that request, he ultimately chose to employ the sanction of civil contempt because it had “the obvious benefit of being warranted on the existing record, without the need for initiating new proceedings.”

While the use of civil contempt and jail time has grabbed the attention of legal commentators and bloggers, the entry of a contempt finding is a recognized, albeit rarely used, sanction available under Rule 37(b)(2). It is an extreme sanction used in this instance for extreme misconduct. Unfortunately, while the sanctions imposed in Victor Stanley II have garnered much attention, they have obscured the deeper significance of the decision. As explained below, in Victor Stanley II, Judge Grimm effectively makes the case for the need to establish uniform culpability standards under the federal rules for spoliation.

Recognizing the deeper significance of Victor Stanley II

The Judicial Conference of the United States is charged with carrying on “a continuous study of the operation and effect of the general rules of practice and procedure” used in our federal courts. The Chief Justice of the Supreme Court is the presiding officer of the Judicial Conference. Under 28 U.S.C. § 331, the Judicial Conference strives to promote “simplicity in procedure, fairness in administration, the just determination of litigation and the elimination of unjustifiable expense and delay.” Various committees have been established which make policy recommendations to the Judicial Conference. One of the Judicial Conference’s Committees is the Civil Rules Advisory Committee. Judge Grimm, the author of Victor Stanley II, is a member of the Civil Rules Advisory Committee.

In May of this year, the Civil Rules Advisory Committee held a two-day conference at Duke Law School to address whether changes are needed to our federal system of civil justice. Significant concerns over the cost, burden and complexity of ediscovery were primary factors which triggered the conference at Duke. In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 559 (2008), the Supreme Court recognized “the success of judicial supervision in checking discovery abuse has been on the modest side,” and that “the threat of discovery expense will push cost-conscious defendants to settle even anemic cases.”

The Civil Rules Advisory Committee recently issued a Report to Chief Justice Roberts about the conference at Duke which can be read here. While there was significant disagreement over whether wholesale changes to the federal rules are needed, it appears that concensus was initially reached on two issues that frequently arise with ediscovery. The first involves the need to provide more precise guidance on a party’s obligation to preserve information. One panel at the Conference produced a document entitled: “ELEMENTS OF A PRESERVATION RULE,” which can be read here. The second area of consensus involved the need to establish uniform culpability standards for ediscovery sanctions. Given that background, it is not too difficult to recognize the significance of Victor Stanley II in light of the Civil Advisory Committee’s Report concerning the 2010 Conference on Civil Litigation.

Why uniform standards under the federal rules are needed

In Victor Stanley II, Judge Grimm began his analysis of ESI spoliation issues by observing:

Recent decisions … have generated concern throughout the country among lawyers and institutional clients regarding when the duty to preserve potentially relevant evidence commences, the level of culpability required to justify sanctions, the nature and severity of appropriate sanctions, and the scope of the duty to preserve evidence and whether it is tempered by the same principles of proportionality that Fed. R. Civ. P. 26(b)(2)(C) applies to all discovery in civil cases. Moreover, concern has been expressed by some commentators that court decisions finding spoliation and imposing sanctions have, in some instances, imposed standards approaching strict liability for loss of evidence without adequately taking into account the difficulty — if not the impossibility — of preserving all ESI that may be relevant to a lawsuit, the reasonableness of the measures that were taken to try and preserve the relevant ESI, or whether the cost that would be incurred by more complete preservation would be disproportionately great when compared to what is at issue in the case. The lack of a national standard, or even a consensus among courts in different jurisdictions about what standards should govern preservation/spoliation issues, appears to have exacerbated this problem. It is not an exaggeration to say that many lawyers, as well as many institutional, organizational, or governmental litigants, view preservation obligations as one of the greatest contributors to the cost of litigation being disproportionately expensive in cases where ESI will play an evidentiary role.

Addressing the duty to preserve evidence, Judge Grimm notes that with few exceptions, “courts have tended to overlook the importance of proportionality in determining whether a party has complied with its duty to preserve in a particular case, [and] this should not be the case because Fed. R. Civ. P. 26(b)(2)(C) cautions that all permissible discovery must be measured against the yardstick of proportionality.”

Judge Grimm then observes: “Unfortunately, in terms of what a party must do to preserve potentially relevant evidence, case law is not consistent across the circuits, or even within individual districts.” Currently, corporations and businesses whose activities extend to multiple jurisdictions “cannot look to any single standard to measure the appropriateness of their preservation activities, or their exposure or potential liability for failure to fulfill their preservation duties. A national corporation cannot have a different preservation policy for each federal circuit and state in which it operates.” Therefore, Judge Grimm acknowledges that the only “safe” approach is to design a preservation policy which “complies with the most demanding requirements of the toughest court to have spoken on the issue, despite the fact that the highest standard may impose burdens and expenses that are far greater than what is required in most jurisdictions in which they do business or conduct activities.”

Judge Grimm observed that in the Second and Fourth Circuits, documents are considered under a party’s control, which triggers a duty to preserve them, when a party “has the right, authority, or practical ability to obtain the documents from a non-party to the action.” However, he also noted that district courts in the Third, Fifth and Ninth Circuits “have held a preservation duty extends only when the party controls the evidence, without extending that duty to evidence controlled by third parties.” Finally, he pointed out that in the First and Sixth Circuits, “there is also a duty to notify opposing party of evidence in the hands of third parties.” Thus, Judge Grimm rhetorically asks what should a company that conducts business in each of these circuits “do to develop a preservation policy that complies with the inconsistent obligations imposed by these circuits?”

He then notes that various courts also “differ in the fault they assign when a party fails to implement a litigation hold.” Judge Grimm compares the approaches taken in the in the Southern District of New York and the Northern District of Illinois on this point. He observes that in Pension Committee v. Bank of Am. Sec., LLC, 685 F. Supp.2d 456 (S.D.N.Y. 2010), the court concluded that the failure to implement a written litigation hold constitutes gross negligence per se. However, in Haynes v. Dart, 2010 WL 140387 (N.D. Ill. Jan. 11, 2010), the court ruled that while the failure to institute a litigation hold was a relevant consideration, it was not per se evidence of sanctionable conduct.

Judge Grimm further notes that in the Seventh, Eighth, Tenth, Eleventh and D.C. Circuits, severe sanctions such as the entry of a default judgment, striking pleadings, or the issuance of an adverse inference may not be imposed unless “there is also evidence of ‘bad faith.’” He also points out that in several circuits, unintentional conduct is insufficient to raise a presumption of relevance when spoliation sanctions are sought. But conversely, he explains that in the Second Circuit, both relevance and prejudice “may be presumed” when the spoliating party acted in a “grossly negligent” manner.

Perhaps in a bit of understatement, Judge Grimm acknowledges that the lack of uniform national standards “has created uncertainty” for organizations regarding how to conduct themselves in a way that will comply with these multiple, inconsistent standards. He even attached to his decision an appendix, which charts the approaches taken in each of the federal circuits on preservation and spoliation sanctions. That chart can be seen here. Because Judge Grimm was well aware of these concerns, he explained:

Nothing in this Memorandum should add to this collective anxiety. Defendants do not dispute that spoliation took place, relevant evidence was lost, and Plaintiff was prejudiced accordingly; that Defendant’s misconduct was sufficiently egregious to warrant sanctions; and that the sanctions warranted are serious. Nor is this a case where defendants have claimed or demonstrated that what they did was reasonable and it involved effort and expense that were proportionate to what is at stake in the litigation. In such an instance, the Court could be excused for simply acknowledging Defendants’ concessions and applying the applicable law of the Fourth Circuit without considering the broader legal context in which preservation/spoliation issues are playing out in litigation across the country. While justified, such a narrow analysis would be of little use to lawyers and their clients who are forced, on a daily basis, to make important decisions in their cases regarding preservation/spoliation issues, and for whom a more expansive examination of the broader issues might be of some assistance.

While the sanctions imposed in Victor Stanley II have certainly grabbed the headlines, the deeper significance of the decision lies in the fact that a member of the Civil Rules Advisory Committee effectively makes the case for the need to develop uniform federal standards involving the issuance of spoliation sanctions.

Examining the source of the duty to preserve

Judge Grimm concluded that except in those jurisdictions “that view spoliation to be an actionable tort,” the duty to preserve evidence is a “duty owed to the court, not to a party’s adversary.” He expressed the view that the proper recognition of this distinction should inform a court about the appropriate sanction to impose for spoliation. On this point, we part ways with Judge Grimm. His logic suggests that the sanctions imposed for the same discovery mishap in federal proceedings could vary depending on the source of the preservation duty under the common law of the particular jurisdiction where the mishap occurred. That approach would be inconsistent with the concept of uniform culpability standards, and in our view, reinforces their need. Sanctions for the same discovery mishap should not vary in federal proceedings as one moves across state lines.

Applying common sense to the imposition of certain ediscovery sanctions

One point from Victor Stanley II with which we wholeheartedly agree is Judge Grimm’s conclusion that certain sanctions make no logical sense when applied to particular breaches of a preservation duty. He explains:

[A]n adverse instruction makes little logical sense if given as a sanction for negligent breach of the duty to preserve, because the inference that a party failed to preserve evidence because it believed that the evidence was harmful to its case does not flow from mere negligence–particularly if the destruction was of ESI and was caused by the automatic deletion function of a program that the party negligently failed to disable once the duty to preserve was triggered. The more logical inference is that the party was disorganized, or distracted, or technically challenged, or overextended, not that it failed to preserve evidence because of an awareness that it was harmful.

Rule 37 sanctions for violations of preservation orders warranted

Judge Grimm recognized that the duty to preserve evidence “is a common law duty, not a rule-based duty,” and that that “[o]n its face, Rule 37(b)(2) permits sanctions for disobedience of ‘an order to provide or permit discovery.’” In Victor Stanley II, the orders he entered merely called for the preservation of ESI. So, Judge Grimm addressed whether Rule 37 sanctions could be entered for court orders that merely command the preservation of evidence. Ultimately, he concluded that Rule 37 sanctions were appropriate because a court order to preserve information “has as its core purpose, the objective of insuring that ESI can be ‘provided’ during discovery and is intended to ‘permit’ that discovery,” Thus, a court has the authority to impose Rule 37 sanctions for the violation of a court-issued preservation order, even if the order does not actually mandate the production of that evidence.

Victor Stanley II is a blockbuster decision that should be thoroughly reviewed by any serious ediscovery practitioner. Judge Grimm is once again on the leading edge of hot ediscovery issues important to anyone engaged in federal-court practice.

Court rules that under the Stored Communications Act, account holder consent is required to obtain copies of emails in Google’s possession. Before you issue a subpoena seeking copies of emails, read Beluga Shipping.

Suzlon is the third largest wind turbine manufacturer in the world. In an action pending in the Federal Court in New South Wales Australia, Suzlon brought cross claims for fraud and breach of fiduciary duty against several of its former employees who were imprisoned in India.

Suzlon believed that its former employees used internet mail accounts hosted by Google to perpetrate their fraud. Therefore, it filed a petition under 28 U.S.C. §1782 to obtain discovery from Google. 28 U.S.C. §1782 provides the means by which parties to a foreign proceeding can obtain discovery in the United States for use in that proceeding. The Federal Rules of Civil Procedure apply in §1782 proceedings unless the court prescribes a different procedure to follow. In Beluga Shipping, the district court applied the Federal Rules of Civil Procedure.

In its §1782 petition, Suzlon sought leave to issue subpoenas to Google to obtain all emails sent or received by its former employees using specific Gmail accounts. Suzlon also sought any records establishing when those Gmail accounts were created, the name provided to Google by the user of each account during the account creation process, the country in which each account was created, how Google stores or saves emails in its Gmail accounts and how information regarding when emails sent to and from a Gmail account is recorded and stored.

The district court permitted Google to intervene and oppose Suzlon’s petition. Google argued that under the Stored Communications Act, 18 U.S.C. §§2701-2712, consent of the individual account holders is required, and that unless their consent is obtained, it could not lawfully comply with Suzlon’s subpoena.

In response, Suzlon cited Zheng v. Yahoo, Inc., 2009 U.S. Dist. LEXIS 111886 (N.D. Cal., Dec. 2, 2009), and argued that the Stored Communications Act does not apply to foreign citizens. Therefore, Suzlon argued that Google was obligated to comply with its subpoena. However, the district court found Zheng inapplicable because “the email interceptions and disclosures occurred outside of the United States by a company whose servers were located outside the United States.” In the court’s view, these factors led to Zheng’s conclusion that the Stored Communications Act does not apply to foreign nationals. However, because Google and its servers are located in the United States, the district court concluded that the Stored Communications Act was applicable in the case before it.

Because Suzlon had not obtained the consent of its former employees, the district court denied, its petition to subpoena the emails of those employees, without prejudice to a renewed showing that the account holders’ consent had been obtained. The court did direct Google to produce documents which established when the specific Gmail accounts in question were created, the actual names of the email account holders provided to Google during the account creation process and the countries from which the specific Gmail accounts were created. The court further directed Google to continue to preserve the emails contained in the specific Gmail accounts in question pending a showing of consent by the account holders.

Despite the unusual procedural context in which this decision arose, the Beluga Shipping decision is significant for any litigant who seeks information from a provider of internet email service such as Google, Yahoo or Hotmail. Without the consent of the account holder, parties may be unable to obtain by subpoena emails that were sent or received by the account holder. So, first seek the consent of the account holder and if that fails, consider a motion asking the court to compel the account holder’s assent. Additionally, when communications occur through applications found in the “cloud,” the Stored Communications Act can raise a similar impediment to obtaining communications stored in the cloud.

The comments to Model Rule 1.6 explain that a lawyer “must act competently to safeguard” client information against the inadvertent or unauthorized disclosure by a lawyer or anyone who is subject to the lawyer’s supervision. The use of clawback agreements in electronic discovery has become commonplace given the exponentially greater volume of information typically involved and the heightened risk that privileged or protected information will be inadvertently disclosed. While the terms of clawback agreements can widely vary, under a typical clawback, the parties agree that if privileged or protected information is disclosed, it will be returned pursuant to that agreement.

The problem with clawback agreements is that they are not enforceable against third parties. If your client is involved in related litigation involving similar issues, should the parties involved in that litigation learn of the disclosure of privileged information in your case, they could seek its production, irrespective of your clawback, by arguing they were not parties to your agreement and that the privilege was waived by your disclosure. Indeed, that limitation is codified in Fed. R. Evid. 502(e) which provides: “[a]n agreement on the effect of disclosure in a federal proceeding is binding only on the parties to the agreement.” So while clawback agreements serve a worthwhile purpose, they are not risk free. Better protection against third-party waivers in a federal proceeding can be obtained if a federal court enters a nonwaiver order under Fed. R. Evid. 502(d). However, many states have not adopted the equivalent of Rule 502(d), and it remains an open question whether a non-waiver order entered in one state-court proceeding is enforceable in other state-court proceedings. See Hopson v. City of Baltimore, 232 F.R.D. 228 (D.Md. 2005).

Thus, there is a continuing need for clawback agreements, especially in state-court litigation. But before entering into a clawback agreement with your opponent, also consider protecting yourself against potential criticism over its use. In document intensive cases, or suits where a significant amount of ediscovery will be sought, discuss the use of a clawback agreement with your client, including its risks and benefits. Obtain your client’s consent before using a clawback. A best practices approach would involve written consent from the client to the use of a clawback agreement before it is entered into with opposing counsel. This can avoid any after-the-fact controversy over the nature of your discussions with the client or the decision to use a clawback to protect the confidentiality of your client’s information.

One of the limitations in the protection provided by Fed.R.Civ.P. 37(e)’s “Safe Harbor” provision is that it ostensibly only applies to ediscovery sanctions “under these rules.” For that reason, I have referred to Rule 37(e) as a “wading pool,” rather than a safe harbor. So, when a court points to Rule 37(e) as a basis for exercising restraint when sanctions are sought under the court’s inherent authority, it bears highlighting.

Grubb involved a claim brought by a former professor at the University of Illinois that the University violated the Computer Fraud and Abuse Act when it accessed a laptop computer he had been using in order to remove University software. That laptop was not owned by the professor but rather by the American Board of Orthodontics (“ABO”), and allegedly contained personal and sensitive information as well as testing data and private patient information. After plaintiff filed suit, ABO gave him a new laptop to use and he returned the one that was involved in his claim against the University. Subsequently, ABO “wiped” the hard drive of that laptop. When the University learned of this development, it filed a motion which sought terminating sanctions under the court’s inherent authority arguing that plaintiff had permitted the destruction of evidence relevant to his claim. The University contended that plaintiff had allowed the spoliation of evidence to occur which rendered it impossible to refute the plaintiff’s Computer Fraud and Abuse claim.

In rejecting the University’s claim for sanctions, the district court noted that in Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991), the Supreme Court warned that a court’s use of its inherent powers “must be exercised with restraint and discretion.” Pointing to Fed.R.Civ.P. 37, the district court observed “restraint seems imminently sensible given the content of the federal rules.”

The district court in Grubb also pointed to the plaintiff’s lack of computer expertise as a basis for exercising restraint. The court noted that plaintiff’s computer expertise, “like most people, falls somewhere in that broad swath between technophobe and technophile.” Taking a common-sense approach to the issue, the district court aptly noted, “it cannot be said that everyday people would possess an understanding of how data are stored and how access history can be reconstructed (or destroyed).” Because plaintiff testified that while he knew how to turn on his laptop but little else about how computers work, the court had little difficulty in concluding that plaintiff did not take any actions for the purpose of hiding adverse information.

The court’s decision in Grubb should be contrasted with Green v. McClendon, 2009 WL 2496275 (S.D.N.Y. Aug. 13, 2009) where a defendant’s lack of computer expertise did not save her from the imposition of sanctions. The Green decision was critically analyzed in one of our prior posts, which can be found here. The outcomes reached in these decisions underscore the practical reality that parties and counsel now face – that the outcome of an ediscovery sanctions motion frequently turns on the approach generally taken in a given district court and by a given district court judge in particular. While uniformity will never be achieved, a more consistent approach would certainly ease the burdens of ediscovery on clients and their counsel, and is one of the reasons why various organizations are pushing to have the federal ediscovery rules amended.

Here at Practical Ediscovery, we are always on the lookout for decisions that bring a little bit of sanity to the crazy world of ediscovery. Therefore, we thought the Haynes decision was worth a mention. While Haynes involved the alleged failure to preserve paper records, not ESI or emails, the decision addressed a motion for sanctions which claimed that evidence was lost as a result of the alleged failure to impose a formal litigation hold at the onset of the case.

While a party has a duty to preserve potentially relevant information once litigation is “reasonably anticipated,” the court in Haynes, further explained that the duty to preserve potentially discoverable information does not require a party to retain every scrap of paper in its possession. In fact, the court acknowledged that the steps a party must take “to satisfy its obligation to preserve evidence may vary from case to case.” Significantly, the court in Haynes observed that while the failure to institute a litigation hold was a “relevant” consideration, it was “not per se evidence of sanctionable conduct.” The court observed that this case was one of many pending against the Sheriff’s Office, which runs the largest single site jail in the country, “and that the establishment of a formal litigation hold in every case could cause an undue burden.” Because of the “breadth of the plaintiffs’ claims and discovery requests,” the court in Haynes could not conclude “that the absence of a large-scale litigation hold was objectively unreasonable.” The court also found it significant that the lost evidence involved the handwritten notes of a jail superintendent and that there was “no evidence that relevant documents were destroyed pursuant to a routine destruction policy that defendants failed to curb.”

So, while Haynes is helpful, the decision does have its limits and should not be viewed as a “Get Out of Jail Free Card.” Obviously, the safest approach in any case is for the client to take reasonable steps to preserve potentially relevant information once litigation is reasonably anticipated. Decisions such as Haynes provide only a limited backstop, should a misstep occur.

Haynes bears mentioning for another reason. Various ediscovery decisions seemingly require an attorney to follow up and confirm that the client’s “key personnel” are aware of the litigation hold and are preserving potentially relevant ESI. Attorneys frequently ask how they can or should identify the key personnel to whom these decisions vaguely refer. After-the-fact criticisms always speak with the wisdom of 20-20 hindsight. The court in Haynes noted that the particular employee of the defendant whose notes were the subject of plaintiffs’ motion for sanctions had been listed in plaintiffs’ Rule 26(a)(1) initial disclosures as someone likely to have discoverable information. Therefore, the court concluded that the witness should have been instructed to preserve relevant information no later than the date of that initial disclosure. Accordingly, one common-sense approach to identifying the client’s “key personnel” is to work from the parties’ Rule 26(a)(1) disclosures. Occasionally, there may be other key employees, but in many, if not most instances, the witnesses listed in those initial disclosures will be the persons most likely to possess relevant information that should be preserved.

The duty to preserve electronically stored information (ESI) can arise long before a lawsuit is ever filed. Several of our prior posts, such as the ones found here and here, chronicle the problem of determining whether a pre-suit duty to preserve is triggered by a letter from a putative plaintiff which contemplates the possibility of litigation. So, any decision which recognizes a landmark that can be readily followed when navigating the pre-suit preservation minefield bears highlighting. Sinai provides such a beacon to follow.

The work-product doctrine encompasses documents that are prepared “in anticipation of litigation.” Siani reached “the common sense conclusion” that if litigation was reasonably foreseeable for one purpose, “it was reasonably foreseeable for all purposes.” 2010 WL 3170664 at *5. Thus, Siani recognizes a direct relationship between the assertion of the work-product doctrine and a duty to preserve ESI in a pre-suit context.

Thus, before asserting the protection of the work-product doctrine, an attorney would be wise to also confirm that the client has instituted a litigation hold to preserve potentially relevant ESI in the context of that anticipated litigation. Claiming the protection of the work-product doctrine means that litigation was reasonably anticipated and that a duty to preserve potentially relevant ESI has been triggered.