Authored By: Jessica K. Rauskolb

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

Employee/Employer Implicated: Outside Counsel, Miscellaneous

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

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

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

Authored By: Gina Barbieri

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

Employee/Employer Implicated: Owners and Corporate Officers

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

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

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

Authored By: Christopher D. Dize

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

Employee/Employer Implicated: Clients and Attorneys

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

Tweet This: NY Appellate Division Rejects Modification of Confidentiality Order

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

Authored By: Fernando M. Pinguelo and Bradford W. Muller

e-Lesson Learned: Small Businesses Who Get "Hacked" Must Act – Now.

Tweet This: http://ellblog.com/?p=2449 http://ellblog.com/?p=2449">Small Businesses Who Get "Hacked" Must Act – Now --> http://ellblog.com/?p=2449

If you have a credit card or bank account, then you may have received an ominous e‐mail alert discussing the data breach that recently occurred at Epsilon, a third‐party vendor which provides marketing services to many companies. Luckily, the stolen information appears to have been limited to the names and e‐mail addresses of only some customers. Apparently, no account numbers or other confidential information was compromised. Nevertheless, names and e‐mail addresses are powerful tools for certain types of cybercriminals known as "phishers" who use social engineering to target potential victims and lure them into exposing confidential financial information. Users of the Sony Playstation Network may not be as lucky, as upwards of 10 million credit card accounts may have been accessed by hackers in the recent network attack.

Authored By: Edward J. Piasecki

Citation: Gyrodata Inc. v. Gyro Technologies, Inc., 2010 U.S. Dist. LEXIS 120084 (D. Conn. Nov. 12, 2010)

Employee/Employer Implicated: Information Technology Staff

e-Lesson Learned: E-mail filter systems with a drop box remain effective devices of preservation, despite their potential to trigger return receipt messages that might suspiciously look like violations of a protective order.

Tweet This: Return receipt messages and suspicion, without more, is NOT evidence of a violation of a protective order.

It is common practice in litigation between industry competitors that litigants will seek protective orders from the court to ensure that in the exchange of discovery, neither party’s trade secrets are revealed or inadvertently made public. It is also common practice for companies to go to great lengths to ensure that they do not destroy any evidence that might be pertinent to the litigation. One method used in preservation is an email filter, whereby incoming and outgoing emails with certain words are copied into a drop box without the sender or receiver ever knowing. This is generally a very effective method. But what happens if a sender’s email has a return receipt on it? Is the jig up? Or even worse, what if the sender, although not a party to the litigation, is not supposed to receive correspondence regarding the litigation because there is a protective order in place?

Authored By: M.J.R.

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

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

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

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

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

Authored By: Gina Barbieri

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

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

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

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

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

Authored By: Michael Tucker Jr.

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

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

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

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

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

Authored By: Christopher Dize

Citation: Ahroner v. Israel Discount Bank of New York, etc., et al., 2010 N.Y. App. Div. LEXIS 9087 (Dec. 7, 2010).

Employee/Employer Implicated: Banks, Management, and Attorneys

e-Lesson Learned: Keep your eye on who’s doing what . . . you just might lose your hard drive.

Tweet This: NY Appellate Division Affirms Spoliation Sanctions

In 2002, bank employee Jacob Ahroner was not happy with his employer, Israel Discount Bank of New York. Consequently, in July 2003, he brought suit, alleging hostile work environment and discrimination based on race, age, and national origin. In November 2002, seven months prior to filing the action, however, Ahroner’s attorney wrote to the Bank. The letter informed the Bank that it was “placed on notice that [it] must undertake all efforts to preserve from spoliation all documents and other records relating to our client’s employment, as well as any unlawful conduct of [the Bank] or its employees. As you may be aware, spoliation gives rise to an inference and instruction that the missing documents would have proved the charging party’s case.” The Bank replied that it was aware of its obligations.

Authored By: Eric Abes

Citation: Gallagher v. Crystal Bay Casino, LLC et al., 2010 U.S. Dist. LEXIS 124421 (D. Nev. Nov. 8, 2010)

Employee/Employer Implicated: Owners; Executives; Counsel

e-Lesson Learned: Failure to preserve evidence can be fatal, financially and judicially.

Tweet This: Whether a company keeps everything, or waits until a trigger to begin preservation, they should consult a lawyer to develop the proper plan for their company.

When I was a kid, every year at Hanukah, my mom had a one in one out policy for toys. If I got a new Transformer, I had to donate an old toy to Goodwill. It taught me two important lessons: always think of those less fortunate and try to keep the clutter in your home to a minimum. My fiancé cannot bear to part with anything. About five years ago she lost weight and went from a size 14 to a size 8. Today, half of her closet is filled with clothes that are 6 sizes too big for her. Which one would you rather have for a client?