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Background Omega Engineering Corporation, an international company based in New Jersey, was once the employer of Timothy Lloyd. To put Omega’s importance into perspective, the U.S. Navy and NASA were two of their clients for highly specialized and sophisticated industrial process measurement devices. According to testimony during the trial, Lloyd worked at Omega as its sole system administrator from 1985 through 1996. In 1995, Lloyd had undergone Novell network training and installed Novell software on Omega’s computer system. Additionally, Lloyd was the only person who maintained and had top-level access to the Omega network. Between 1994 and 1995, Lloyd became belligerent and increasingly truculent. Due to his poor interpersonal skills, he was demoted in May 1995 from manufacturing to support engineer. A woman who had once been Lloyd’s subordinate and had engaged in a romantic relationship with Lloyd, was the individual responsible for replacing Lloyd as manufacturing supervisor. In June 1996, Lloyd instituted a policy to “clean up” all of the individual computers in Omega’s manufacturing department. It was unclear as to why Lloyd was implementing company policies after his demotion. Nonetheless, the policy required employees to save their files to the company’s file server and prohibited them from making their own backups. Lloyd’s manager became suspicious of this policy and requested from Lloyd access to the file server. Lloyd never complied. By the end of June, upper management had enough of Lloyd’s behavior and terminated him in early July 1996. On July 31, Omega’s file server would not boot up. All of Omega’s manufacturing programs on the server, which contained instructions for operating the machines, were gone. Multiple computer experts were brought in to recover the files, but to no avail. The files had not only been deleted, but also had been “purged,” meaning that they were rendered unrecoverable. A leading expert on Novell networking testified at trial that this could only have been done intentionally and by someone with supervisory-level access. The government’s theory included that on July 30, anyone who would log on to the server at any time after that date would “detonate” a program installed by Lloyd that would destroy the information on the Omega file server. The government’s theory was bolstered by the fact that the Secret Service recovered missing Omega backup tapes that had been reformatted as well as a master hard drive from the file server. This had the same string of commands that had functioned as the time bomb program found on the Omega file server. The Decision Ultimately, Lloyd was found guilty of computer sabotage. The jury had deliberated for over twelve hours over the span of three days and had requested testimony in the jury room before they reached their verdict. However, three days after the verdict, one juror said that she had seen on the news, during the trial, about a computer virus called the Philippine “love bug” which allowed the perpetrator to cause great harm by flooding the victim computers and causing them to crash. Whether this affected her decision is unclear; however, the defendant claimed that his 6th Amendment rights had been violated. The district court agreed, granting a new trial. On review, the Court of Appeals reversed the district court’s holding. After a lengthy discussion, the court said that there were significant dissimilarities between the “love bug” and the “time bomb” and most jurors would not confuse the two. Therefore, the appellate court found, the defendant was not prejudiced. Lloyd’s managers should never have allowed a single employee hold as much power as they did. This case highlights the vulnerabilities the company subjects itself to if that is allowed to happen. For example, Omega lost over 1,200 programs and many current and potential clients as well. Akiva Shepard received his J.D. from Seton Hall University School of Law in 2014. Akiva has worked for a New York State Supreme Court Judge in Kings County, and for a NJ real estate firm.
In Haskins v. First Am. Title Ins. Co., the court was asked whether a title insurance company (the "Insurer") is in "control" of documents that are in not in the Insurer's possession, but where the Insurer has the contractual right to direct those with possession to produce the documents. The district court found in the affirmative, demonstrating that in some circumstances, the more extensive one's contractual rights, the more extensive its obligations in discovery. The plaintiffs sought class certification, which defined the class as all New Jersey consumers who paid premiums in excess of regulated title insurance refinance rates during the class period. The plaintiffs alleged that the Insurer had overcharged for title insurance over a period of several years. During discovery, plaintiffs sought certain documents in the possession of certain independent title agents, who were not employees of the Insurer, but with whom the Insurer had a contractual relationship. The representative contracts made all documents "available for inspection and examination by [the Insurer] at any reasonable time." The court inquired as to whether such documents are in the "control" of the Insurer, because pursuant to Fed. R. Civ. P. 34(a), a party may request another party to produce documents within that party's "possession, custody, or control." Thus, if such documents were in the "control" of the Insurer, the plaintiffs could properly request that they be produced in discovery. The Insurer argued that it should not be required to produce documents in the physical possession of its agents because it does not possess or control the requested documents. However, the court did not struggle to conclude that the Insurer's agency contracts plainly indicate that it has control over and access to the documents. It drew this conclusion based on the premise that there is control if a party “has the legal right or ability to obtain the documents from another source upon demand.” Haskins demonstrates the potential for increased discovery obligations for those that have negotiated extensive rights in contract. That is, the greater rights in contract, the potential for broader obligations in discovery. While this factor may not drive the decision making for those negotiating contracts, contract parties should at least be aware of this consequence Adam L. Peterson 2014 graduate of Seton Hall University School of Law. While at Seton Hall, Adam was a member of the Seton Hall Law Review and prior to law school Adam was an Environmental Analyst with the New York State Department of Environmental Conservation.
Richard Fraser was an independent contractor working for Nationwide Mutual Insurance Company when he was fired in 1998. Although Fraser argued that he was fired for reporting illegal policies that Nationwide had implemented, Nationwide stated he was fired because he was disloyal to the company. Nationwide found that plaintiff had drafted (but not sent) two letters to two Nationwide competitors, Erie Insurance Company and Zurich American Insurance, expressing Contractors Association members' dissatisfaction with Nationwide and seeking to determine whether Erie and Zurich would be interested in acquiring the policyholders of the agents in the Contractors Association. After discovering the letters, Nationwide also searched its mail file server and found e-mails revealing company trade secrets. Fraser filed a wrongful termination suit against Nationwide, arguing that Nationwide’s accessing Fraser’s e-mail account without permission violated the Electronic Communication Privacy Act and a parallel Pennsylvania statute. The trial court granted Nationwide’s motion for summary judgment and Fraser appealed. The Third Circuit Court of Appeals affirmed the trial court’s ruling that Nationwide had access to the independent contractor’s emails. Nationwide was found to not have violated the ECPA because Nationwide had provided the independent contractor with the e-mail account, the e-mail was hosted on Nationwide’s servers, and the e-mails were acquired after transmission of the e-mails. Therefore, the court held that the e-mails were not intercepted by Nationwide. Title 1 of the ECPA prohibits the interception of e-mails, but Nationwide argued that since the e-mails were reviewed after the transmission of the e-mail, that no interception had occurred. The court agreed and found that for one to intercept e-mail, he must occur contemporaneously, at the time of the transmission. Therefore, as long as the seizure of e-mail occurs after the e-mail is transmitted, a company does not need permission to access the independent contractor’s e-mails. Salim received his B.A. in Applied Communications, with a minor in Legal Studies, from Monmouth University. He received his J.D. from Seton Hall University School of Law in 2014. Salim’s past experiences include interning for a personal injury law firm prior to attending law school, as well as judicial internships in the Civil and Family Divisions.
In this case, Peerless Industries, Inc. sued defendants Crimson AV, LLC claiming patent infringement and design patent infringement arising out of defendant’s manufacture and sale of certain TV mounts. While not a defending party, Sycamore Manufacturing Co., Ltd. (“Sycamore”) is plaintiff's former supplier of these TV mounts and played a vital role in the alleged infringement. Sycamore is located in China, while Peerless and Crimson are both located in the United States. Plaintiffs filed two motions: (1) a motion to compel the deposition of the Sycamore’s president, Tony Jin, and (2) a renewed motion for sanctions, both of which were granted. It was also determined in a previous case that Jin exercised managerial control over both Sycamore and Crimson. Therefore, plaintiff satisfied that Mr. Jin is a managing agent of Crimson. The court stated, “Plaintiff must simply show ‘that there is at least a close question as to whether the witness is a managing agent.’ We already found this to be the case. Furthermore, Mr. Jin clearly satisfies the ‘paramount test,’ which is whether the individual identifies with the corporation's interests as opposed to an adversary's.” The court further ordered that without any showing of hardship, Jin’s deposition would have to take place in the United States and not in China. As for the plaintiff’s renewed motion for sanctions, this motion marked the third time the plaintiff filed a motion regarding the same set of documents. The plaintiff argued that at the deposition of Crimson’s managing director, “it became clear that defendant did not conduct a reasonable investigation regarding Sycamore’s document production or Sycamore’s document retention for purposes of this litigation.” The plaintiff then filed a renewed motion for sanctions. The defendant and Sycamore asserted that certain documents in Sycamore’s possession had been produced. The plaintiff noted, that defendants did not represent that all requested documents were produced or that they were searched for but no longer existed. The plaintiff argued that the defendant wanted to rely on the same declarations as opposed to issuing more specific responses. The court stated that since it had determined Jin was principal of both Crimson and Sycamore and that he exercised a considerable amount of control over both corporations, that he was able to obtain all relevant documents from Sycamore. However, the court found that defendant took a “back seat” approach and instead used a third-party vendor to collect the documents. Finding that neither Crimson nor Jin had apart in the process of obtaining the requested discovery, the court granted the plaintiff’s motion for sanctions. The court held that this “hands-off’ approach is insufficient. “Defendants cannot place the burden of compliance on an outside vendor and have no knowledge, or claim no control, over the process. Finally, the court held that defendants must show that they in fact searched for the requested documents and, if those documents no longer exist or cannot be located, they must specifically verify that it is they who cannot produce. Salim received his B.A. in Applied Communications, with a minor in Legal Studies, from Monmouth University. He received his J.D. from Seton Hall University School of Law in 2014. Salim’s past experiences include interning for a personal injury law firm prior to attending law school, as well as judicial internships in the Civil and Family Divisions. Currently, Salim is taking part in the Immigrants’ Rights/International Human Rights Clinic at Seton Hall Law.
This Article was originally published with Bloomberg Law Reports on November 9, 2011. The Internet has afforded anyone, anywhere, a wealth of information at one's fingertips. Within the current and everexpanding age of technology, Brazilian- and U.S.-based courts continue to draw legal boundaries within a seemingly boundless cyberspace. The boundlessness of the Internet, and its related technologies, transcends geographical limits and poses worldwide issues of regulation. One such technology, which has caught the attention of businesses and resulted in significant legal battles, is "scraping" - a computer software technique that extracts publicly available information from websites. While in and of itself, "scraping" may not be unlawful, courts in Brazil and the U.S. have begun to carve out permissible and impermissible uses of this technology. Brazilian Scraping Lawsuit A recent court opinion of first impression in Sao Paulo, Brazil, gives newfound meaning to ownership rights of information available on the Internet. The Brazilian court's opinion in Curriculum Tecnologia Ltda. v. Catho Online S/C Ltda., et al, examines claims of unfair competition and violation of copyright rules, as applicable to the Internet. The plaintiff, Curriculum Tecnologia Ltda. ("Curriculum"), and defendant, Catho Online S/C Ltda. ("Catho"), are employment recruitment companies, operating solely through the Internet. Thousands of individuals seeking employment use the services of these companies by posting their resumes on the respective websites. In turn, employers seeking to hire review thousands of potential candidates to fill their open positions. In fact, Curriculum is the largest employment website in Brazil, providing a meeting place for over 6 million registered applicants and 100 thousand user companies. These services allow for a faster and easier connection to the open job market. In February 2002, developers at Curriculum noticed an unusual increase in activity on their company's website. While, generally, Curriculum's customers search approximately 500 resumes per day on its website, developers became suspicious when one particular user registered over 63,000 searches in one day. Upon further investigation, Curriculum technicians blocked the particular account and tracked its origin back to a computer at Catho, the defendant competitor. As a result of its investigation and findings, Curriculum filed suit against Catho alleging various business-related claims. As the lawsuit proceeded in the normal course, fact gathering efforts revealed flagrant and deceptive practices by Catho to illegally, in violation of Brazilian law, acquire information from Curriculum's website. In short, Catho developed a program that enabled it to copy ell mass Curriculum's website information database through which it could access resumes from Curriculum's website. Once Catho gained access to the resume information, it used it for its own commercial purposes. The purpose behind Catho's efforts was to increase its own potential employee base in order to offer a wider range to online employment recruiters. Catho acquired hundreds of thousands of resumes from its competitors through the use of these and related methods. Indeed, Curriculum was not the only competitor to bring suit against Catho for these practices, as several other victims of this Internet hacking scheme brought separate actions against Catho. To appreciate the breach of security and the value of the acquired information, one must understand the function of the employment recruitment market in Brazil within which these parties operate. Both parties operate primarily as online employment search engines. Individuals who seek employment and employers who seek skilled individuals, use the services of these recruitment companies by paying fees which permit the posting of resumes and job advertisements, allowing for searches of both to be performed. These web-based services offer various levels of fee-based access to these postings and search capabilities, which in turn generate revenue for these companies. Curriculum's website provides its users with instructions and several menus that allow them to browse its webpage efficiently and effectively. Curriculum does not provide every user with access to its resume bank. Instead, the website uses filters that permit only certain clientele with particular fee-based account settings to access this information. Catho used hacking programs to breach these security devices, allowing unauthorized access to resumes on Curriculum's website, spurring the lawsuit. Specifically, the programs developed by Catho allowed it to take advantage of security flaws in Curriculum's website, and gain access to the entire proprietary database - thereby transferring tens of thousands of resumes in a single clandestine night of debauchery. After plaintiff filed suit, the parties set forth arguments before the Brazilian court in support of their respective positions. Curriculum argued it had a property ownership interest in the data, and therefore Catho engaged in unfair competition and unauthorized copying of Curriculum's information. Catho argued that the information was public, access to the website was open and unrestricted, and therefore the information was not afforded legal protection. In sustaining a lower court's previous finding of damages.judge Luiz Mario Galbetti of 33 Civil Court of Sao Paulo found that Catho engaged in unfair competition by breaching Curriculum's internal computer systems and illegally acquiring thousands of resumes posted therein. The court held that the transmission and expansion of Catho's own database through this illegal acquisition served to increase its market visibility with direct effects on the profits obtained by Catho. Relying on notions of unfair enrichment, abuse of rights, and unpredictability, the court awarded damages in the amount of R$21,828,250.00 (in Brazilian Real). In calculating damages, the court considered the amount charged by Catho per month for posting a resume on its website, R$50.00, multiplied by the 436,595 resumes it illegally acquired. With interest and additional penalties this R$21,828,250.00 resulted in an award of R$63 million in damages, or approximately $42 Million USD. U.S. Scraping Lawsuits Similarly, U.S.-based courts have addressed the legal boundaries of extracting information from public websites. In EF Cultural Travel v. Zefer Corp., 318 F.3d 58 (1st Cir.2003), the U.S. Court of Appeals for the First Circuit issued a preliminary injunction pursuant to the Computer Fraud and Abuse Act (“CFAA”), 18 U.S.C. 1030, to prohibit the use of a “scraper” software program that defendants used to collect pricing information from the plaintiff/competitor’s website. Zefer Corp. (“Zefer”) sought review of the injunction, implemented in a prior hearing with co-defendant Explorica, Inc. (“Explorica”). See EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577 (1st Cir. 2001). EF and Explorica are competitors in the student travel business, operating websites that permit their respective visitors to explore various vacation packages. To gain a competitive edge, Explorica hired Zefer to build a program that would allow Explorica to “scrape” the prices from EF’s website and download them into an Excel spreadsheet. After accessing EF’s vacation package pricing, Explorica tailored its own costs, purposefully undercutting EF on an average of 5%. EF stumbled upon the “scraping” scheme as a result of discovery in an unrelated, state court lawsuit involving Explorica. As a result, EF filed suit in federal court, seeking an injunction on the grounds that the “scraping” violated both federal copyright laws and various provisions of the CFAA. The underlying issue in the case was whether the use of the scraper program exceeded “authorized access,” in violation of federal law. The relevant CFAA provision examined by the court provides: Whoever. . . knowingly and with intent to defraud, accesses a protected computer without authorization, or exceeds authorized access, and by means of such conduct furthers the intended fraud and obtains anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such useisnotmorethan$5,000inany1-yearperiod. . .shall be punished as provided in subsection (c) of this section. While the CFAA defines “exceeds authorized access” as “to access a computer without authorization and to use such access to obtain or alter information in the computer that the accesseer is not entitled so to obtain or alter,” the court in EF Cultural Travel provided analysis of the term “authorization.” The trial court held that authorization could be determined both explicitly, for example through a direct statement restricting access, or implicitly. In defining the implicit prong, the trial court relied upon a “reasonable expectations” test. Even though the appeals court agreed that authorization can be both explicit and implicit, it rejected application of the reasonable expectations test used by the trial court. Instead, the appeals court determined that “public website provider[s] can easily spell out explicitly what is forbidden and consonantly, that nothing justifies putting users at the mercy of a highly imprecise, litigation-spawning standard like ‘reasonable expectations.’” As a result, the appeals court determined that a clear manifestation of the company’s intent that no information be collected from its website was necessary in order to show “lack of authorization,” such as an explicit statement on the webpage restricting access. Or, to put it more bluntly, “[i]f EF wants to ban scrapers, let it say so on the webpage or a link clearly marked as containing restrictions.” Nonetheless, this federal appeals court decision did not eliminate the concept of implicit authorization, as it may suffice in other circumstances. However, the decision highlighted that a plaintiff must demonstrate unambiguously that authorization was prohibited. The EF Cultural Travel decision promulgates the theory that the right to control access implicates a right to prevent or obtain legal remedies for any unauthorized access. As demonstrated in EF Cultural Travel, authorization may be established both implicitly and explicitly. Another method of disclosing a lack of authorization may be through the creation of technological barriers, such as encryption of particular information. Under this regime, after the initial encounter, a third party must either obtain permission or take unusual steps to circumvent the technological barrier. Lastly, database owners may also establish use authorization conditions through contractual terms. Whatever the means of establishing authorization, or the lack thereof, it is apparent that a reasonable effort to protect is a precondition to maintaining this legal right. It is recognized, however, that the mere posting of information on a public domain, such as the Internet, does not in and of itself extinguish a protectable right to that information. This presumption is also echoed in case law analyzing the misappropriation of trade secrets. For example, in Barnett, Inc. v. Shidler, 338 F.3d 1125 (10th Cir. 2003), the court examined whether former employees misappropriated a trade secret by implementing the Infant Swimming Research program (“ISR”), which was designed by plaintiff as a scientific, behavioral approach to pediatric drowning prevention. In finding the ISR program was not a trade secret, the trial court noted “[plaintiff ] allowed its program to become part of the public domain before seeking protection...,” referring to various published books explaining the ISR method. In reversing this finding, the appeals court highlighted the decision in Rivendell Forest Prods., Ltd. v. Georgia-Pacific Corp., 28 F.3d 1042, 1045 (10th Cir.1994) in which the court found that “a trade secret can exist in combination of characteristics, each of which, considered separately, is in the public domain, but, taken together, may yield a competitive advantage that results in a protectable trade secret,” solidifying the argument that information may be a trade secret notwithstanding the fact that some of its components are well known. See also Syncsort v. Innovative Routines, No. 04-CV-03623, 2011 BL 213594 (D.N.J. Aug. 18, 2011) (federal district court of New Jersey examining the existence of a trade secret in light of its brief publishing on the internet). While case law involving scraping requires some form of notification as to non-authorization, this line of reasoning quashes any argument that information posted on the Internet should not enjoy legal protection simply because of its public nature. A court must determine the underlying intent of the scraper because the legality of extracting data from a website often centers on the underlying intent in copying. The copying of information for any purpose deemed a “fair use” may therefore not be actionable. As evidenced by both EF Cultural Travel and Curriculum, this key element is what often implicates legal remedies. Lessons Learned Easy access to information afforded by the Internet has created a global culture that often accepts the free use (and abuse) of information. This often results in blurred lines between public and private property, especially for those who conduct business through the Internet. Therefore, unless a database is composed of content independently entitled to protection, for example through copyright or trade secret law, database owners must rely upon a patchwork of available legal remedies. Database owners may seek protection under unfair trade statutes or under common law theories such as misappropriation. Contractual restrictions also offer protection, but such a remedy requires privity of contract. Moreover, while a claim for trespass may also be a feasible option, most courts require a showing of actual injury. Lastly, and certainly not exclusively, protection under the CFAA may be warranted. While each option has its own nuances, courts are setting down the foundation of protection in response to the legalities of the Internet age. Therefore, while the potential remedies available to database owners under U.S. law tend to be narrow, it is no doubt only the beginning. Regardless of the underlying legal principal asserted against an illegal scraper, liability attaches on a case by case basis depending upon the type of access obtained by the scraper, the amount of information accessed and copied, the degree to which the access adversely affects the Web site owner’s system and the types and manner of prohibitions on such conduct. The significant monetary award issued by the São Paulo court underscores the value that information has to a company and its survival. The decision also serves as a warning to billions of Internet users globally, as the calculation of damages serves not only to punish the wrongdoer but also to deter the illegal activity in and of itself. These decisions evidence a fairly new attempt by courts to address the legal issues posed by the Internet. While the approach is not yet uniform, there are obvious efforts by courts to protect proprietary information on the Internet from uses that are detrimental to the owners of such sites. Fernando M. Pinguelo, a Partner at Norris, McLaughlin & Marcus, P.A. and co-Chair of the Response to Electronic Discovery & Information Group at the firm, is a U.S.-based trial lawyer who devotes his practice to complex business lawsuits with an emphasis on how technology impacts lawsuits. Mr. Pinguelo founded and contributes to the ABA Journal award-winning blog, eLessons Learned – Where Law, Technology, & Human Error Collide (www. eLLblog.com). To learn more about Mr. Pinguelo, visit www. NYLocalLaw.com or email him at info@NYLocalLaw.com. Renato Opice Blum, CEO of Opice Blum Advogados Associados in São Paulo, Brazil, is a Brazil-based attorney and economist, who established one of the first leading technology-based law firms. Mr. Blum is the Coordinator of the MBA course in Information Technology Law at São Paulo State Law School and a distinguished professor at Fundação Getúlio Vargas, among other universities. Mr. Blum is co-author of the book, Internet and Electronic Law. To learn more about Mr. Blum, visit http://www.opiceblum.com.br/ lang-en/01_profissionais_dadosRes.php?ID_CUREQUIPE=138578 or email him at firstname.lastname@example.org. Kristen M. Welsh is a U.S.-based litigation Associate at Schiffman, Abraham, Kaufman & Ritter, P.C. and focuses her practice on business and employment law matters. Ms. Welsh may be reached at KWelsh@sakr-law.com. . This rule of thumb is also applied in cases analyzing the misappropriation of trade secrets. See Barnett, Inc. v. Shidler, 338 F.3d 1125 (10th Cir. 2003). . Various fair uses have been identified by the court. See Nautical Solutions Mktg., Inc. v. Boats.com, Copy. L. Rep. (CCH) ¶28, 815 (M.D. Fla. 2004) (holding that “momentary copying of open . . . public Web pages in order to extract yacht listings facts unprotected by copyright law constitutes a fair use.”); Ticketmaster Corp. v. Tickets.com, Inc., No. 09-CV-07654 (C.D. Cal. Mar. 7, 2003) (“Taking the temporary copy of the electronic information [from the Ticketmaster.com website database] for the limited purpose of extracting unprotected public facts leads to the conclusion that the temporary use of the electronic signals was ‘fair use’ and not actionable.”); see also Assessment Technologies, LLC v. WIREdata, Inc., 350 F.3d 640 (7th Cir. 2003).
Big things can often come in small packages, especially in the field of eDiscovery. In Christou v. Beatport, LLC, the defendants learned that something as small as a text message on a lost cell phone can lead to a bevy of headache-inducing preservation issues, even without proof that the lost texts actually contained relevant information. Originally, the two parties worked together to create Beatport, an online marketplace dedicated to promoting and selling electronic dance music. When that relationship eventually fell apart, the plaintiff, a prominent nightclub owner, brought suit against Beatport and his former employee who, as a “talent buyer,” was responsible for attracting DJs to perform at the plaintiff’s venues. The plaintiff claimed that since the falling-out, the former talent broker had been strong-arming DJs against performing at the plaintiff’s nightclubs by threatening to drop them from his now high-profile website. Soon after the case was filed, the plaintiff issued a litigation hold letter to the defendants seeking the preservation of electronically stored information. Despite the fact that this letter specifically referenced text messages, the defendants made no effort whatsoever to preserve the text messages on the former employee’s cell phone. Of course the phone was then lost, about a year and a half after the hold should have been instituted. The plaintiff sought spoliation sanctions in the form of an adverse jury instruction. The defendants attempted to shelter themselves from punishment behind testimony that the former talent broker did not use texts to contact clients and no proof was offered that there was relevant evidence anywhere in the phone. Thus, the defendants felt the plaintiff’s motion was entirely speculative. Given the disappearance of the phone, the court recognized that there was simply no way to know whether it contained any relevant evidence. There was also no evidence that the defense had done their due diligence by reviewing the text messages to determine whether any were responsive to the plaintiff’s discovery requests. The court explained that spoliation sanctions are appropriate when “(1) a party has a duty to preserve evidence because it knew, or should have known that litigation was imminent, and (2) the adverse party was prejudiced by the destruction of the evidence.” Here, there was no question that the defendants neglected their duties by failing to make any effort whatsoever to preserve the text messages. Because the loss of the phone was an accident, or at the most the result of negligence, an adverse jury instruction was unwarranted because it would be too harsh a punishment. Instead, the court permitted the plaintiffs to present evidence at trial about the litigation hold and the defendant’s failure to abide by it. Despite finding no foul play by the defendants, sanctions were necessary because “[a] commercial party represented by experienced and highly sophisticated counsel cannot disregard the duty to preserve potentially relevant documents when a case like this is filed.” The previous sentence best sums up the defendants’ actions. They completely shirked all responsibility by failing to turn over the requested text messages or securing the phone itself. Even though the phone was lost accidentally, spoliation sanctions were warranted because of the defendants’ complete disregard of their preservation duties. The time and money spent belaboring this eDiscovery dispute could have been completely avoided if the defendants simply preserved all of its electronically stored information, especially those documents specifically mentioned in a litigation hold. Instead, the defendants suffered what probably turned out to be significant financial consequences fighting the motion and were left to combat incredibly damaging evidence at trial. Jeffrey, a Seton Hall University School of Law graduate (Class of 2014), focused his studies primarily in the area of civil practice but has also completed significant coursework concerning the interplay between technology and the legal profession. He was a cum laude graduate of the University of Connecticut in 2011, where he received a B.S. in Business Administration with a concentration in Entrepreneurial Management.
Individual plaintiffs often exert settlement leverage against corporate defendants because, irrespective of the merits of the suit, the prospective costs of litigation coerce early settlement. Therefore, an individual plaintiff often has nothing to lose. Even if a plaintiff’s suit is meritless, often times the worst case scenario faced is dismissal of the suit. Additionally, where a case is taken on a contingent fee basis, an individual plaintiff is merely left where they started. However, Taylor v. Mitre Corp. shows that in some circumstances an individual plaintiff can in fact find himself or herself in a worse position than prior to litigation. In Taylor, the plaintiff of the same name filed suit against his former employer, The Mitre Corporation, alleging violations of the Family Medical Leave Act and Americans with Disabilities Act. However, it was Taylor that was soon on the defensive. First, Taylor was accused of spoliating evidence when he smashed a work computer with a sledge hammer. It is not clear what sanctions resulted from this conduct; however, the court did not remain quiet following Taylor's later response to the Magistrate Judge's ordering Taylor to produce his laptop for inspection. Upon issuance of the order, Taylor promptly ran specialized programs—Evidence Eliminator and CCleaner—on his computer for the clear purpose of deleting relevant data and information. Upon learning of Taylor's second act of spoliation, the court sanctioned Taylor by dismissing his suit. A severe sanction, of course, but it is arguable whether dismissal alone serves as an effective deterrent to future spoliation of evidence. After all, if a plaintiff has extensively spoliated evidence, it is likely that a plaintiff’s case was not meritorious in the first place. Additionally, dismissing a non-meritorious suit will merely leave the plaintiff where he started and leave the defendant out a bundle of unnecessary litigation costs. Accordingly, the court not only dismissed Taylor's suit but also found him responsible for Mitre's reasonable fees and costs associated with the motion for sanctions—$202,399.66 in total. The court arrived at this total by applying the lodestar methodology and was not swayed by Taylor's claim of financial hardship. It is believable that an individual plaintiff will be hard-pressed to pay such costs; however, the court reasoned that reducing an award of fees and costs is appropriate where the full sanction will have a chilling effect on the filing of future, potentially meritorious, claims. The court found that imposing sanctions for bad-faith spoliation would not have such a chilling effect, and therefore refused to reduce the award in favor of Mitre. So what's the moral of the story? In many cases a plaintiff will have little to lose and the nuisance value of their suit places them in strong settlement position. But conduct by the plaintiff in bad-faith can quickly shift this leverage. Adam L. Peterson is a graduate of Seton Hall University School of Law (Class of 2014). Adam was a member of the Seton Hall Law Review and, prior to law school, Adam was an Environmental Analyst with the New York State Department of Environmental Conservation.
In Brown v. Tellermate Holdings Ltd., Tellermate Holdings, the defendant company, terminated two employees for allegedly failing to meet sales targets over several years. The employees, feeling that they were wrongfully terminated due to their age, filed an employment discrimination action against the company as well as other entities and individuals associated with Tellermate. Throughout pre-trial proceedings, the case was plagued with numerous discovery mishaps. The plaintiffs requested from the defendant company data stored and maintained by Salesforce.com, which would, in theory, evidence plaintiffs’ sales records over the last few years in addition to allowing the plaintiffs to compare their sales figures with other (younger) employees. However, even though numerous discovery conferences were held, numerous discovery motions filed with the court, and several discovery orders issued by the court, the defendant corporation failed to produce the requested data and documents. Ultimately, the plaintiffs filed for judgment and sanctions under Federal Rule 37(b)(2); the court held a three-day evidentiary hearing on the matter. The presiding judge, United States Magistrate Judge Terence P. Kemp, identified three areas in which the defendant company or its counsel failed in its obligations to the plaintiffs and the court in relation to production of documents and data: Defendant’s counsel failed to understand how Tellermate’s data stored with Salesforce.com could be obtained and produced to plaintiffs, which resulted in counsel making false statements to the plaintiffs’ counsel and the court; By failing to understand how the defendant’s data was stored and maintained, defendant’s counsel took no steps to preserve the integrity of the information in Tellermate’s database located with Salesforce.com; Defendant’s counsel failed to learn of the existence of documents relating to a prior age discrimination charge until almost a year after plaintiffs requested the documents; Defendant’s counsel produced a “document dump” resulting from counsel’s use of an overly-broad keyword search that yielded around 50,000 irrelevant documents, which plaintiffs’ counsel could not review within the time period ordered by the court. The Salesforce.com Data Judge Kemp found that Tellermate’s failure to preserve and produce the data logged on Salesforce.com’s website irreparably deprived the plaintiffs of reliable information necessary in supporting their claims. Although defendant’s counsel initially stated that Tellermate “does not maintain salesforce.com information in hard copy format,” “cannot print out accurate historical records from salesforce.com,” and that “discovery of salesforce.com information should be directed at salesforce.com, not Tellermate,” the court found such statements to be on their face false. In fact, Tellermate did have access to the information sought by the plaintiffs as one, and sometimes two, of Tellermate's employees enjoyed the highest level of access to the Salesforce.com information. The court determined that the information eventually produced by the defendants could not be trusted as “even a forensic computer expert has no way to detect hat changes, deletions[,] or additions were made to the database on an historical basis.” Because of Tellermate’s failure to preserve the Salesforce.com data, Judge Kamp precluded Tellermate from providing evidence showing that the plaintiff-employees were terminated for their alleged underperformance. Counsel’s Obligations With Respect to ESI The court found that the defense’s counsel fell short of their well-established obligations to critically examine the documents and data Tellermate provided to them. Tellermate made false representations to its counsel about the data’s availability and therefore caused undue delay in document production as well as false and misleading arguments to be made to plaintiffs’ counsel and to the court. Subsequently, the plaintiffs were forced to file discovery motions before the court to address these discovery issues which produced the Salesforce.com data that was never properly preserved albeit its significance to the plaintiffs’ case. Judge Kemp ultimately determined that counsel for the defendant conducted an inadequate investigation of Tellermate’s electronic data while simultaneously failing to understand the most basic concepts of cloud computing and cloud storage, which led to counsel’s failing to preserve key electronic data. Control of Data Stored in the Cloud As mentioned above, Tellermate and its counsel repeatedly represented to the plaintiffs and to the court that it did not possess and could not produce any of the Salesforce.com data requested by plaintiffs. Additionally, the defendants asserted that in light of those facts, the defendants could not preserve the data stored on Salesforce.com’s databases at any point prior to litigation. Judge Kemp dismissed these claims. The court concluded that, without any factual basis whatsoever, no substantive argument could be made that Tellermate was prohibited from accessing the information stored on the Salesforce.com databases or that Salesforce.com was responsible for preserving Tellermate’s information and data as it was the entity that maintained possession and control of the data. In reality, Tellermate was the custodian of the data stored on the Salesforce.com databases. While information can be stored in locations outside the immediate control of the corporate entity by third party providers, it can still be under the legal control of the owner of the data and therefore must be produced by the owner under Federal Rule 34(a)(1)(A). Additionally, had Tellermate’s counsel critically examined the agreement between Tellermate and Salesforce.com, it would have realized that Tellermate was the owner of all data created by its employees and that Tellermate could, at any time, download the data stored on the Salesforce.com databases for preservation and production purposes. Limitations on Document Production to Avoid “Document Dumps” Tellermate produced to the plaintiffs 50,000 pages of irrelevant documents, classified by Judge Kemp as a “document dump.” Tellermate’s counsel refused to disclose which search terms it used in deciding which documents to produce to the plaintiffs, claiming that the search terms were privileged. In actuality, the court discovered, Tellermate’s counsel only used the full names and nicknames of employees as its search terms, which obviously yielded irrelevant documents. Without reviewing the returned documents, and because the court’s deadline for producing relevant documents was rapidly approaching, Tellermate’s counsel produced to the plaintiffs the documents as “Attorney’s Eyes Only.” The court recognized that a protective order was permitted only when counsel held a good faith belief that such information constituted a “trade secret or other confidential research, development, or proprietary business information, and that such material was entitled to a higher level of protection than otherwise provided in the protective order.” Tellermate could not demonstrate entitlement to this level of protection with respect to the search terms used in procuring documentation for discovery: The alleged burden imposed by a high volume production does not provide the producing party or its counsel free reign to choose a given designation and ignore the Court’s order pertaining to that designation. First, the court looked to whether competitive harm would result from the disclosure of the types of documents produced by Tellermate to a competitor; however, Tellermate’s memorandum on the issue did not contain any evidence about the harm which might result if the plaintiffs were permitted to review any particular document that was labeled “Attorney’s Eyes Only.” Second, Tellermate’s argument as to the harm it would experience was entirely conclusory and was not supported by evidence: Apart from the general concept that disclosure of some types of sensitive information to a competitor may result in harm, it contains no particularized argument which is specific to [the plaintiff], the way in which he was competing with Tellermate, and how the disclosure of any one of the 50,000 pages marked as attorneys-eyes-only would harm Tellermate’s interests. The court was astounded that Tellermate continually failed to meet the burden required to designate the documents as “Attorney’s Eyes Only” and, up until the hearing date, made no effort the redesignate a single page of the 50,000 produced in order to permit the plaintiffs from viewing the documents. Sanctions The court had absolutely no qualms with an award of attorneys’ fees for all motion practice connected to the preservation and production of the Salesforce.com data. “Had Tellermate and its counsel simply fulfilled their basic discovery obligations, neither of these matters would have come before the Court, or at least not in the posture they did.” The court took great concern to the extraordinary lengths the plaintiffs had to go to in order to obtain the documents maintained by the defendant and, even after several rounds of motions, were not able to obtain all of them. The “Attorney’s Eyes Only” designation on the 50,000 documents produced was also unfounded, the court held, and unduly precluded plaintiffs from necessary evidence that supported their case, which warranted fees under Federal Rule 37(a)(5)(A). Conclusion Tellermate provides a warning to all attorneys that the realm of technology in which their clients are constantly interact with is always changing. Therefore, so does the practice of electronic discovery. Counsel must always meet its duties with respect to ESI by engaging in discussions with its clients and opposing counsel about ESI; being aware, and perhaps even knowledgeable, of new and emerging technologies; and investigating and assessing with its clients the sources and status of potentially relevant ESI. By forgoing these practices, counsel opens itself and its clients to easily avoided and costly sanctions. Daniel is the Editor-in-Chief of eLessions Learned and a third-year law student at Duquesne University. To read more about him, click here.  Salesforce.com is a cloud-based customer relationship management system with more than 100,000 corporate customers around the world. Tellermate and its employees used Salesforce.com to track their sales and other interaction with customers. The court recognized that each sales person using the Salesforce.com management system could add, remove, or otherwise change data on their sales account.  See Zubulake v. UBS Warburg LLC, 382 F.Supp.2d 536 (S.D.N.Y. 2005) (counsel had an affirmative duty to monitor preservation an d ensure all sources of discovery information were identified).
The scope of discovery, as stated in Federal Rule 26, has been construed very broadly in its relevancy standard. Any and all requesting parties can seek production of documents and information as long as “the discovery appears reasonably calculated to lead to the discovery of admissible evidence.” And while this standard has the tendency of having the producing parties provide all requested, non-privileged documents within their control, some courts have determined there are exceptions. In Potts v. Dollar Tree Stores, Inc., the Middle District of Tennessee determined that requests for private Facebook pages require the rquesting party must meet a threshold showing that the information sought is likely to be found on the social media site and lead to admissible evidence. In Potts, the plaintiff filed suit against her former employer, Dollar Tree Stores, Inc., claiming harassment and discrimination based on the plaintiff’s race, a hostile work environment, and retaliation. After discovery disputes, the defendant filed a motion to compel claiming that the plaintiff did not produce a number of requested items and documents, including: Facebook data, any and all computer and storage devices used during and after the plaintiff’s employment, tax returns, any relevant documents in online email accounts, as well as other items. The plaintiff’s response to the defendant’s request asserted that she produced what documents were in her possession, that the defendant’s request for the physical production of her computer was unduly burdensome, and that the defendant is not entitled to access to her private Facebook account due to other court holdings requiring a threshold showing that the Facebook page would undermine the producing party’s claim(s). Since, the Sixth Circuit Court of Appeals had not yet ruled on requesting parties’ access to private Facebook pages, the Middle District of Tennessee relied on outside court rulings in Thompkins v. Detroit Metro. Airport, 278 F.R.D. 387, 388 (E.D. Mich. 2012) and McCann v. Harleysville Ins. Co. of N.Y., 910 N.Y.S.2d 614 (N.Y.App. Div. 2010). Courts in Michigan and New York held that, while Facebook accounts are not considered privileged or necessarily protected by notions of privacy, requesting parties should not be allowed to go on fishing expeditions in hopes of finding relevant information to their case. In resolving the issue of rummaging for information, the courts held that a requesting party seeking access to private Facebook accounts must meet a threshold showing that the social media page will likely lead to admissible evidence. Adopting the idea of a “threshold showing,” the Potts court determined that the defendant fell short in showing that the information it gathered from the plaintiff’s public Facebook page would lead to admissible evidence if the plaintiff had given more access. The court determined that the defendant was entitled to certain documents in the defendant’s motion to compel that Plaintiff had not yet produced in discovery, but accepted the plaintiff’s assertion that she no longer had certain requested documents that would not have been relevant to the case. When dealing with the physical production of the plaintiff’s computer, the court resolved that an agreed neutral party would search for relevant documents on the plaintiff’s computer, using both parties’ agreed-upon word search. As for the the defendant seeking attorneys’ fees incurred in preparing the motion to compel, the court ruled that Federal Rule 26(b)(2) gives discretion to the court in relieving any undue burdens on responding parties during discovery. The court did not require the plaintiff to pay the defendant’s attorneys’ fees due to the plaintiff having reasonable objections to the defendant’s discovery requests.
In W Holding Co., Inc. v. Chartis Ins. Co. of Puerto Rico, the receiver of Westernbank, FDIC-R brought action under the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA) against the banks’ directors and officers (D & O’s) for gross negligence, breach of fiduciary duties, fraudulent conveyances, and adverse domination. Prior to discovery, FDIC-R proposed an order establishing a protocol for discovery of Wesernbank’s ESI and to reduce the number of written interrogatories it would receive. The D & O’s offered a competing protocol. The court denied FDIC-R’s request to alter the number of interrogatories and issued a separate order to establish ESI protocol. When FDIC stepped in as a receiver for Westernbank, it possessed 6.8 terabytes of ESI and over 900,000 paper documents. FDIC spent $2.1 million to put the ESI into a system called DMS iConnect (“DMS”), an internal database where the relevant paper documents were scanned into digital images and processed to generate searchable text. FDIC waned to use a second contractor-maintained system called Relativity to give its litigation opponents searchable access to selected data, which will cost $450 per gigabyte to move. FDIC-R wanted D & O to share in the costs. FDIC–R advanced three rationales in support of its proposal: (1) ESI production costs are analogous to “copying costs” borne by the requestor; (2) the Westernbank ESI is “not reasonably accessible” under Rule 26(b)(2)(B); and (3) the seven-factor test applied in Zubulake III requires cost-shifting in this case. The court disagrees with all three FDIC-R’s arguments. As to the argument that production costs are analogous to copying costs, the Court felt that FDIC-R failed to explain how those costs are outside the realm of gathering and preparation expenses customarily borne by responding parties. As for accessibility, the Court disagreed with FDIC-R’s position that Federal Rule of Civil Procedure 26(b)(2)(B) required cost-shifting when large volumes of ESI were involved. To be inaccessible, the FDIC-R would have to argue the “cost or burden” of production is tied to “some technological feature that inhibits accessibility.” However, the FDIC-R failed to raise any technological issues. The court further noted that the relevant data had already been uploaded into a searchable and organized retrieval system. The court also rejected FDIC-R’s third argument that the seven-factor test in Zubulake III requires cost shifting. Zubake also requires that the date in question be inaccessible, which the Court already stated was not. Finally, as to the request to limit the number of interrogatories, the Court believed the requests were “too speculative to merit a ruling at this time.” The Court felt that until the parties take more affirmative discovery steps, there is no ground for the Court to alter the defaults under the Federal Rules of Civil Procedure. Salim received his B.A. in Applied Communications, with a minor in Legal Studies, from Monmouth University. In 2014 he received his J.D. from Seton Hall University School of Law in 2014. Salim’s past experiences include interning for a personal injury law firm prior to attending law school, as well as judicial internships in the Civil and Family Divisions.