E-discovery is a constantly developing topic in the legal world, and the word, “world,” should be taken literally.  Across the globe, different nations and their legal system are formulating new rules to tackle new discovery issues that can arise almost as quickly as new technology and means of communication can develop.  The only problem with this, however, is that different nations are addressing their e-discovery issues with different solutions.  This problem usually rears its ugly head when one of the parties in a lawsuit is a multinational company.  What is a British company supposed to do when it’s sued in an American because of a foul-up by its French Subsidiary?  Do they supply all of the e-discovery materials required by American courts?  What if e-discovery that the American court requires no longer exists because it never needed to be stored in the first place by   French or British?

The European Commission, the executive arm of the European Union (“EU”), responsible for proposing legislation and implementing decisions in addition to running the EU on a day-to-day basis and upholding EU treaties, recently took steps toward untangling this e-discovery web of confusion and contradiction.  The European Commission had previously established the working party, an independent advisory board charged with handling issues relating to data protection and privacy in the EU.

The working party recently addressed the issue of transborder e-discovery relating to data held in Europe that was required to be produced as a result of legal proceedings occurring in the United States.   It recognized that a certain tension had mounted as a result of disclosure obligations under American legal rules differing with data protection requirements in the EU,  the working party also recognized that this was particularly relevant to European affiliates of multinational companies that were getting caught while trying to balance their obligations as a result of American e-discovery demands in connection to litigation and the various data protection and privacy laws governing the transfer of personal information that also varied among the different countries within the EU.  The working party saw that there was a need to reconcile the U.S. litigation requirements and EU data protection provisions and as a result, recommended a set of guidelines to be followed by EU data controllers.  These guidelines were eventually adopted in February 2009.  Among the guidelines adopted were a number of provisions applicable to lawsuit parties, businesses, lawyers, courts, & governments.

One conflict addressed by the working party that is likely the most applicable to e-discovery problems is what is to be done when a foreign company has to concern itself with American document retention rules that may conflict with the rules in the country where the company operates.   Due to the fact that different countries each have different time limits for potential litigants to bring a claim, it was not practical for the working party to establish a particular uniform period of time for data to be stored.  Thus, the guidelines provide as a solution that data controllers in the EU should have a clear policy on data storage, management, and retention.   So as long as the policy comports with local applicable guidelines and the policy is adhered to, the data controller will not be found to be at fault with US law because US rules of civil procedure merely require that existing information be disclosed to the adverse party.   An exception to this, however, is that if there is data relevant to a specific, imminent litigation process, it should be stored even such storage would not otherwise be required by the data storage policy in order to prevent spoliation of evidence.  The guidelines also address the process to be followed when an American court, a “litigation hold of pre-emptive requirement that information be retained.  In such scenarios, the data storage policy and/or and data destruction policy for documents that may be relevant to the legal claim is to be suspended.

This is just one of many problems addressed by the working party.  Their recently adopted guidelines also resolve globally conflicting laws relating to e-discovery issues that include, but are not limited to disclosure of sensitive personal data, consent, proportionality, transparency, rights of access and erasure, data security, and transferring data to third parties.  As a result, any company that does business in the U.S. as well as the EU would be best served by familiarizing itself with the working party’s recently adopted guidelines.

Frank received his B.a. from Wesleyan University.  In addition to being an award winning gardener, he is a third-year law student at Seton Hall University School of Law and can be contacted at fgiantomasi@gmail.com.  After graduating, he will clerk for a New Jersey Superior Court judge.

The lesson here is twofold:  If you are going to depose witnesses regarding ESI, you must put the other party on notice of the scope of the deposition testimony being sought, or risk losing the opportunity to conduct further depositions.  But regardless of whether you are the party who asks or the party who answers, you must be sure to make every reasonable effort to resolve discovery disputes.

Plaintiff filed a 42 U.S.C.A. § 1981 claim, alleging that a stop by a store detective employed by Borders on December 2, 2005 was motivated by racial discrimination.  In response, defendant contends that plaintiff was questioned because the store detective saw him “place an item from the shelf of the store into a bag he brought into the store.”

Plaintiff served defendant with a notice to take a deposition pursuant to Rule 30(b)(6), which requires (1) that the organization being served designate a witness who can speak knowingly regarding the topic, and (2) that the party serving the organization define as clearly as possible the topics that will be covered in the deposition.

Plaintiff’s notice failed to mention the store’s email policies or any ESI in general; and instead stated only that the deposition would include discussion of defendant’s general document retention policies.  Defendant’s designated witness was unable to clearly articulate defendant’s document retention policies regarding email, and plaintiff therefore moved to have defendant designate another 30(b)(6) witness.

The Court first found that a reasonable lawyer reading plaintiff’s deposition notice would not be able to conclude that defendant’s email retention policies were going to be topics of discussion.  Further, the Court found that given the vast amount of business transactions conducted electronically, plaintiff should have specified that the email retention policy would be a subject of the deposition.  Lastly, the Court noted that there was no evidence that defendant had engaged in any behavior to suggest it knowingly destroyed any pertinent emails or that it failed to search conscientiously for relevant emails.

Despite the Court’s findings, the Court ultimately found that defendant’s document retention policies were relevant to the dispute and that the parties failed to try hard enough to resolve the issue.  Pointedly noting that “the potential legal fees in this case, thanks to the many discovery disputes, will dwarf the potential recovery,” the Court exercised its discretion to end the dispute by ordering defendant to answer a series of questions posed by the Court regarding email retention policies.

While plaintiff benefited from the Court’s order, he was ultimately denied the opportunity to depose a second witness using his own questions.

The parties in Wixon v. Wyndham Resort Development Corp. reached an agreement that by a specific date, Wyndham would produce electronically stored information (“ESI”) held by specific custodians that matched specific search terms.  But what happened when, after the deadline, Wyndham revealed a stash of ESI found in a shared directory of a hard drive not allocated to a specific custodian?  Does a document not directly linked to a specific custodian automatically become “nonresponsive”?

The plaintiffs and defendant Wyndham had reached a written agreement that Wyndham would produce ESI limited to “specific search terms and custodians” and that it would “complete [its] production by no later than February 16, 2009.”  The agreement defined the scope of the ESI as that based on documents responsive to a specific set of search terms and “limited to the list of 26 [Wyndham] custodians.”  The agreement also included a built-in punishment should a party fail to complete discovery within the agreed upon period:  Hard copy and ESI documents not produced by the deadline could not be used by either party in support of or to defend the plaintiffs’ imminent motion for class certification.

Wyndham sent the plaintiffs its initial production by the February 16 deadline, but it also produced an additional 30,000 ESI documents more than two months after the agreed upon deadline had passed.  And when Wyndham announced that it intended to allow its expert witness to use some of those additional documents in its fight against class certification, the plaintiffs filed a motion to strike.

Wyndham seemed to acknowledge that the agreement required it to produce all “responsive” documents by the February 16 deadline.  But it argued that the exclusion clause of the agreement—the prohibition on using the document to defend plaintiffs class certification motion—only applied to “responsive” documents not produced by the deadline, and that “nonresponsive” documents produced after the deadline were fair game.  Wyndham then argued that documents it produced late were nonresponsive because they did not come from one of the named custodians.  It explained that the documents were located on a shared file directory that was not linked to a particular custodian.  A Special Master assigned by the court agreed with Wyndham’s argument, concluding that because the untimely ESI did not come from a named custodian, it was not “responsive” according to the agreement between the parties, and thus was not untimely.

The district court for the Northern District of California rejected the Special Master’s recommendation and reasoning.  In addressing Wyndham’s excuse that it was unaware of the existence of the shared directory as its reason for failing to timely produce the ESI, the court quickly imputed knowledge of the shared directory to Wyndham.  Referring to named custodian Scott Grey, the court explained that “Mr. Grey, and therefore Wyndham, knew about this directory.”   The court accused Wyndham’s proposed custodian-based ESI search of containing “a major flaw, namely a directory full of potentially relevant documents with no custodian.”  The court refused to allow Wyndham to use the logic that a document not specifically linked to a named custodian is nonresponsive, and concluded that it was “[not] reasonable for Wyndham to ignore the problem and rely on an overly narrow and hyper-technical reading” of the agreement.  Finding Wyndham’s decision to not timely produce documents from the shared directory unjustified, the court ordered Wyndham to pick up the tab for both the plaintiffs’ motion to strike costs and the Special Master’s fees.

Wyndham could have avoided this ruling by carefully mapping out its custodian-based production and determining early on where key players in the dispute might have squirreled away documents.  Counsel, in directing the collection of ESI, should not overlook locations such as personal and shared folders on scanners, servers, and removable drives.

According to the 9^th circuit, the answer is a NO!

In Quon v. Arch Wireless Operating Co., 529 F.3d 892 (9^th Cir. 2008), the City of Ontario Police Department (“OPD”) had a formal policy governing city-owned computers and associated equipment that limited its use to City related business.  It also warned that the users should have no expectation of privacy or confidentiality when using these resources.  When the OPD issued pagers to its employees, it clarified that the policy also applied to the use of pagers.  Under the OPD’s contract with its service provider, each pager was allotted 25,000 characters, after which it incurred overage charges.

Quon’s supervisor informally allowed employees to pay for their overages thereby avoiding the need to audit the messages.  Accordingly, employees paid their share when they exceeded the character limit and avoided an audit.  Quon’s repeated overages, however, frustrated the supervisor, who pursuant to the formal policy requested an audit to determine if the exceedances were due to city related business.  The audit revealed that many of the messages were personal in nature and often sexually explicit.  It also revealed that at least in one instance the pagers were used to undermine a narcotics investigation.

Quon filed suit against the OPD, alleging breach of privacy among other claims.  The ninth circuit held that despite the OPD’s formal anti-privacy policy warning users not to expect privacy or confidentiality when using OPD-issued resources, Quon’s expectation of privacy in his text messages was reasonable.  According to the court, the supervisor’s informal policy not to audit text messages if the employee paid the additional charges, trumped OPD’s formal policy because the supervisor was in charge of the pagers and his statements carried a great deal of weight.

This serves as an important lesson for the employers.  Make sure that your managers and supervisors are strictly enforcing the policies that you have in place.  Any deviation could leave you open to unnecessary lawsuits.  Strict enforcement might be difficult depending on the operational realities of the department, but it is nonetheless critical to ensure the effectiveness of the existing policies.  If the supervisor had simply enforced the policy it already had in place every time there was an overage, this lawsuit would probably not have arisen.

Another interesting aspect of Quon is the 9^th circuit’s application of the Stored Communications Act or the SCA.  The Congress enacted the SCA (as part of the Electronic Communications Privacy Act) to address access to stored wire and electronic communications and transactional records arising from the advent of the Internet.  It prohibits providers of either “an electronic communication service” (ECS) or a “remote computing service” (RCS) from knowingly divulging the contents of a communication while in electronic storage or any other information pertaining to a subscriber or customer of that service.

There are exceptions.  If the provider is an ECS, then the information stored by it may be disclosed, with the lawful consent of only the author, the addressee or the intended recipient of that communication.  In the case of a RCS, the information may be disclosed with the lawful consent of the subscriber of the service.

This distinction was critical in Quon because along with the City of Ontario, the plaintiffs sued the wireless service provider for divulging the contents of their text messages to the City.  Since the City was the subscriber of the service, its authorization to release the content of the messages would be sufficient to absolve only a RCS of any liability.

This begs the question: what determines whether a provider is an ECS or a RCS?  The SCA defines a RCS as the provision to the public of computer storage or processing services by means of an electronic communication system.  Whereas, an ECS is any service which provides to its users the ability to send or receive wire or electronic communications. Under the SCA, an ECS could temporarily store the electronic communication incidental to its transmission or for the purposes of backup protection.

Reviewing the legislative history and plain language of the SCA, the 9^th Circuit concluded that the City’s provider, Arch Wireless, was merely an ECS.  Arch Wireless provided Quon and other users the ability to send or receive text messages and therefore fell squarely within the definition of an ECS.  It did archive those messages and therefore “store” them on its server, but Congress contemplated this exact function as one an ECS could perform.  Therefore, any information stored on Arch Wireless’ server after delivery was deemed by the court to be for backup protection.  The type of “storage” required by a RCS is akin to that of a virtual filing cabinet, such as when physicians and hospitals maintain medical files in offsite databanks.

The 9^th Circuit did hint that if a provider were to retain a permanent copy of the text messages (beyond the underlying message’s expiry in the normal course) or stored them for the benefit of the subscriber, it could become an RCS.

This decision could have far-reaching implications for many, including any employers that provide pagers or subscribe to communication services for their employees.  If the employer does not itself store the messages sent and received on the pagers, then despite any anti-privacy policy, the employer may be unable to monitor those messages.  As only a subscriber, it would not have the lawful authority to authorize its provider to release those messages.

The decision is also a warning to Internet Service Providers (ISPs) to enact and enforce policies that ensure that its employees do not release information simply upon the authority of their subscriber, whether in connection with litigation or otherwise.  It is certainly possible that an ISP could be an ECS to one client and a RCS to another if it also provides storage and processing services.  Therefore, any analysis of a request for information from a subscriber must begin by determining the ISPs relationship to the subscriber.  If, and only if, the ISP is an RCS for that particular client, can the ISP release the information upon the subscriber’s authority.  Enterprising ISPs may use this opportunity to broaden their relationship with their subscribers by offering storage and processing services and thereby converting the relationship to a RCS.

It is likely that employers could just avoid all this uncertainty by requesting the employee to sign a written consent authorizing the ISPs to disclose any information transmitted or received by that pager or associated with it prior to supplying that employee with a pager or communication service.

One can also imagine the impact of Quon’s decision extending to cloud computing.  Although the analysis of its application is beyond the scope of this post, one should be mindful that under the court’s interpretation an example of processing services offered by a RCS include businesses that transmit their records to remote computers to process sophisticated information.

However, the California amendments depart from the federal rules in a few distinct and important ways.  Lawyers practicing in California must be aware of these changes because failing to adhere to them could result in dire consequences for their clients.

There are two other major ways in which the California rules do not mirror the federal rules.  First, although the California rules set forth certain conditions for limiting the scope of electronic discovery in a fashion similar to the federal rules, a key variation among the rules is that California’s start with the presumption that all ESI is accessible.  Where FRCP 26(b)(2)(B) explicitly limits discovery seeking inaccessible ESI, the California rule shifts the burden to the responding party.  After receiving a request for production of ESI, the responding party must specifically object to the production of ESI on grounds that the information is inaccessible.  Further, if the requesting party moves to compel production, it is the responding party who bears the burden of proving that the requested ESI is in fact, inaccessible.

Second, and perhaps more importantly, the California rules require parties to identify and detail their inaccessibility objections in their responses to discovery requests, regardless of whether they intend to move for a protective order.  Failing to adhere to this rule could result in the responding party’s waiver of inaccessibility as a basis not to produce ESI.  Because the California rules require a detailed response as to why certain information is inaccessible, it is important for attorneys to have a comprehensive understanding of the client’s information technology systems. The earlier an attorney can familiarize his or her self with the client’s IT systems, the better prepared he or she will be to explain what information is inaccessible when served a request to produce documents.  

Bridgewater, NJ (April 23, 2010) – Fernando Pinguelo, a Member of Norris McLaughlin & Marcus, P.A., appeared as a guest on Fox News Channel’s live web show, The Strategy Room, hosted by Kimberly Guilfolye.  Pinguelo was interviewed about today’s headlines featuring internet abuse, including the Security and Exchange Commission Office of Inspector General’s 5-year investigation that revealed SEC employees and contractors visiting porn sites and viewing sexually explicit pictures using government computers. Ms. Guilfoyle’s guests today also included Richard “Bo” Dietl and Dr. Kathryn Smerling. 

The Strategy Room airs weekdays from 9 a.m. to 5 p.m. ET for a discussion of the day’s top stories, plus a variety of hour-long shows on topics like business, health, technology, and entertainment.

“Casual use of the internet in the workplace is on the rise.  With up-to-the-minute Facebook statuses and Twitter ‘tweets,’ the use of company time for personal internet use has become common place.  This has become so common that it is obvious employees don’t realize their actions can be tracked and saved.  This new breaking story testifies to the fact that many workers don’t realize the implications of their actions online,” said Pinguelo.

Pinguelo, Co-Chair of the firm’s Response to Electronic Discovery and Information (REDI) Group, devotes his practice to complex litigation with an emphasis on business disputes, electronic discovery, and media and employment matters.  He has experience in all facets of litigation (trial, mediation, arbitration, and appellate) in both federal and state courts. As a former prosecutor, he has tried numerous cases.  Today, Pinguelo handles a broad spectrum of disputes including copyright infringement, misappropriation of trade secrets, fraud, breach of non-compete covenants, discrimination, and business torts, and is able to address a rapidly evolving crisis or emergency.

A leader in the emerging area of electronic discovery, Pinguelo works with business owners, C-level executives, in-house counsel, and human resources, information technology, and risk managers to develop strategies to manage business and legal issues related to electronic documents. He recognizes that complex contract and statutory considerations impact the evolving business environment. This understanding enables him to help clients comply with the broad array of laws that regulate document management. Pinguelo focuses on preventing claims and pursues strategies that enhance a client’s ability to manage electronic documents because he is keenly aware of the financial and public relations fallout that can result from high-profile electronic discovery abuses and negligence.

Notably, Pinguelo was involved in New Jersey’s first case addressing its new electronic discovery rule amendments, and has lectured numerous times on the topic, including at the Judicial College which provides judges with a wide range of academic programs. He has designed a state-of-the-art electronic discovery law course and teaches one of only a handful of such courses in the country at Seton Hall University School of Law.  Recently, the Fulbright Program, the U.S. government’s flagship international exchange program, designated Pinguelo a Fulbright Specialist for his work in eDiscovery, and he will engage in a project at a university in one of over 100 participating countries.  Pinguelo was also invited to be a member of eDiscovery Group of The Sedona Conference® Working Group Series, a prestigious series of think-tanks consisting of leading experts brought together by a desire to address various “tipping point” issues in each area under consideration.

To view the official press release, click here.

Pinguelo earned his J.D. from Boston College Law School in 1997 and his B.A., magna cum laude, from Boston College in 1994.  He is admitted to practice in New Jersey, New York, and the District of Columbia, and is the founder of eLessons Learned.

In High Voltage, the plaintiff filed a motion to compel the defendant to search for alternative sources beyond the initial production of documents for the selection of the VAULT mark.  This would involve having the defendant review an additional 1.5 million pages of documents (17 gigabytes) beyond the 1.7 million pages already produced to the plaintiff.

Predictably, the defendant was unwilling to shoulder the burden of reviewing the additional documents, as defendant reasonably believed it would not provide any new discovery that had not already been provided to the plaintiff.  However, the defendant was more than willing to allow the plaintiff to review the additional source of information by allowing the plaintiff to search through the additional sources for documents relating to the selection of the VAULT mark.

The court, citing Rule 26 of the Federal Rules of Civil Procedure, denied plaintiff’s request to compel the additional documents, finding that under Rule 26, plaintiff’s additional request was unreasonably duplicative and the additional material requested likely had already been produced to the plaintiff.  The court also found that the defendant made an unrebutted showing that the burden or expense of plaintiff’s proposed discovery outweighed its likely benefit.

Thus, if the defendant can show the court that it acted in good faith and complied with reasonable discovery requests, a motion to compel additional documents would be denied unless the benefits of additional discovery will outweigh the burden/expense.  Even though the court held against the plaintiffs, it still required the defendant to once again offer the plaintiff an opportunity to search through those additional documents at defendant’s place of business.  Plaintiffs would not be allowed unreasonably burden the defendant with additional document requests simply by making numerous requests for documents that may have already been provided.  If the Plaintiffs were to insist on the additional documents, they would have to do the work themselves and bare the costs.

In Paris Business Products, Inc. v. Genisis Technologies, LLC (“Paris”), Genisis Technologies, LLC, (“Genisis”) was subject to a discovery order requiring it to preserve all relevant data on company-owned computer hard drives.  Despite this order, Genisis’ executive officers allegedly were responsible for: (1) deleting the company hard drives by reformatting them; and (2) physically removing and destroying some hard drives.

The court in Paris found that spoliation does not require a finding that the company officers were responsible for the missing data.  An adverse inference can be applied against a defendant for spoliation when there is merely “negligent destruction of relevant evidence.” Paris Business Products, Inc. v. Genisis Technologies, LLC, 2007 WL 3125184, ¶ 9 (D.N.J. 2007) (citing  Mosaid Technologies Inc. v. Samsung Electronics Co., Ltd., 348 F.Supp.2d 332, 338 (D.N.J. 2004)).

All that is required for a court to issue an adverse inference is that “a party has notice that evidence is relevant to an action, and the party either proceeds to destroy that evidence or allows it to be destroyed by failing to take reasonable precautions.”  Id.  Courts may find that the destroyed evidence was probably damaging to the party responsible and issue an adverse inference jury instruction.  Id. (citing Schmid v. Milwaukee Elec. Tool Corp., 13 F.3d 76, 78 (3d Cir.1994).

In Paris, the court found all of the necessary elements were met, and that Genisis destroyed evidence it was on notice to preserve.  As a result, the jury was instructed that they may infer the evidence would have been damaging.  Thus, even when evidence may be damaging to a client, it is important for counsel to inform the client of the serious risks of destroying that evidence.  Adverse inferences make a lawyer’s job more difficult; but more importantly they make a client’s chance of success slimmer – something that all clients should be able to appreciate.

Evan received his B.A. from Washington University, St. Louis. He will receive his J.D. from Seton Hall University School of Law in 2010. After graduation, he will clerk for a Superior Court of New Jersey, Criminal Division judge.

This is due to several major reasons. First, oral contracts are often enforceable. And secondly, even in the absence of a formal contract, increasingly deals are made through email and NY courts have read these emails to form a binding contract (this is because that ancient statute of frauds statute was amended to include electronic communications). Three new NY cases illustrate the courts’ willingness to enforce emails as a contract.

Al-Bawaba.com Inc. v. Nstein Techs. Corp., the court enforced an e-mail exchange on a licensing agreement as a “signed writing” under the statute of frauds, because sender typed his name at the bottom of a critical e-mail.

In Stevens v. Publicis, S.A., the court concluded an employment agreement was modified by virtue of the sender typing his name at the bottom of a critical email.

In JSO Assocs. Inc. v. Price, the court held that a typed name at the foot of an e-mail was not necessary to enforce a business broker agreement for a party that arranged to secure purchasers for a business.

So be wary of what you agree to in your next reply.

Though not related to eDiscovery per se, we at eLessons Learned want to alert Law Students and fellow student bloggers of the National Law Review’s writing competition taking place this month.

The National Law Review (NLR) consolidates practice-oriented legal analysis from a variety of sources for easy access by lawyers, paralegals, law students, business executives, insurance professionals, accountants, compliance officers, human resource managers, and other professionals who wish to better understand specific legal issues relevant to their work.

The NLR Law Student Writing Competition offers law students the opportunity to submit articles for publication consideration on the NLR Web site.  No entry fee is required. Applicants can submit an unlimited number of entries each month.

• Winning submissions will initially be published online in April, May, and June 2010.
• In each of these months, entries will be judged and the top two articles chosen will be featured in the NLR monthly magazine prominently displayed on the NLR home page. Up to 25 runner-up entries will also be posted in the NLR searchable database each month.
• Each winning article will be displayed accompanied by the student’s photo, biography, contact information, law school logo, and any copyright disclosure.
• All winning articles will remain in the NLR database for two years (subject to earlier removal upon request of the law school).
• In addition, the NLR sends links to targeted articles to specific professional groups via e-mail. The NLR also posts links to selected articles on the “Legal Issues” or “Research” sections of various professional organizations’ Web sites. (NLR, at its sole discretion, may distribute any winning entry in such a manner, but does not make any such guarantees nor does NLR represent that this is part of the prize package.)

To enter, an applicant and any co-authors must be enrolled in an accredited law school within the fifty United States. Employees of The National Law Review are not eligible. Entries must include ALL information listed above to be considered and must be submitted to the NLR Marketing Coordinator assigned to entrant’s law school by stated deadlines.

Please click here for more information and the official rules of the competition.