12.17.2010 Sanctions Down; Cooperation Up; Preservation, Privacy and Social Media Remain Challenging.
12.17.20102010 has been an exciting year in the development of e-discovery law and practice. While the number of reported e-discovery opinions remained fairly constant from 2009 to 2010 (208 opinions in 2009 versus 209 through December 1, 2010), three major opinions issued this year provide an extensive overview of the current state of e-discovery law. See Pension Committee of the Univ. of Montreal Pension Plan v. Banc of America Securities, 2010 U.S. Dist. LEXIS 4546 (S.D.N.Y. Jan. 15, 2010); Rimkus Consulting Grp. v. Cammarata, 2010 U.S. Dist. LEXIS 14573 (S.D. Tex. Feb. 19, 2010); Victor Stanley, Inc. v. Creative Pipe, Inc., 250 F.R.D. 251; 2010 WL 3703696 (D. Md. Sept. 9, 2010) (Victor Stanley II). These three cases are a good starting point for any practitioner seeking a primer on e-discovery law.
The 2010 e-discovery opinions also reflect a greater facility with e-discovery issues on the part of both the bench and the bar. As in 2009, there were e-discovery opinions issued in every federal circuit, and an important case regarding an employee’s right to privacy in electronic communications and the implications of the Stored Communications Act, 18 U.S.C. § 2701 et seq. (SCA), was heard by the U.S. Supreme Court. Our analysis of these opinions reveals important advances in the practice of e-discovery as litigants and counsel respond to the urgings of the courts to deal fairly and efficiently with the potentially huge burden of e-discovery when conducted inexpertly.
For example, as we discuss more fully below, sanctions were sought and awarded in slightly fewer cases this year. Of the 209 cases in which e-discovery opinions were issued in 2010, sanctions were sought in 79 (38%) and awarded in 49 (62% of the cases in which sanctions were requested, and 23% of all e-discovery cases). This is a decrease from 2009 when sanctions were sought in 42% of all e-discovery cases and were awarded in 70% of the cases in which they were requested (30% of all e-discovery cases). While costs and fees were by far the most common sanction (awarded in 60% of the cases involving sanctions), terminating sanctions, adverse inferences, and the sanctioning of counsel decreased significantly in 2010 (see chart below).
Although requests for sanctions decreased, motions to compel more than doubled in 2010, being filed in 43% of all e-discovery cases, as opposed to 20% in 2009. While this may appear to show less cooperation between litigants, an analysis of these cases actually reveals the opposite: litigants often agreed on the majority of e-discovery issues and sought the court’s intervention only as to the small set of issues on which they could not agree. We believe this reflects greater adeptness by litigants and counsel in e-discovery practice and broader acceptance of cooperation and openness in the e-discovery process.
Courts have long urged litigants to adopt reasonable and proportional e-discovery approaches. The 2010 opinions reveal significant adoption of these approaches by the bar. This is indicated by the decrease in the number of sanctions cases, by the increase in motions to compel as noted above, and by the increasing number of cases where litigants have negotiated detailed e-discovery protocols that are entered as orders of the court. As we discuss more fully below, these protocols often include iterative proportional steps that properly target relevant electronically stored information (“ESI”). They also often include protocols for the use of advanced technology to assist litigants with identifying ESI by, for example, analyzing search terms, sampling data, and using computer assisted review. And, for the first time, we are beginning to see litigants deal with the burden of preservation through the negotiation of preservation agreements. These kinds of agreements are crucial in modern litigation. Litigants should ensure that their e-discovery counsel is adept at negotiating targeted, iterative, proportional ESI protocols that include preservation agreements in appropriate circumstances, as well as the protection of privileged and otherwise protected information through the incorporation of FRE 502(d) orders.
But, while the 2010 cases reveal many advances in e-discovery practice, they also disclose areas where courts and litigants continue to struggle. One of these areas involves the preservation of ESI and when the duty to preserve is triggered. The duty to preserve is triggered once litigation becomes reasonably likely, but, as the 2010 cases show, determining when that point is reached can be tricky. The rule of thumb is that, for defendants at least, the duty is usually triggered upon the filing of a complaint against them. However, as we discuss more fully below, this is not always the case. Invariably, a plaintiff decides to bring an action some time before it files a complaint. In several 2010 e-discovery opinions, even the defendant’s duty to preserve was triggered before it received a complaint. For example, one defendant’s duty was triggered when it hired away the employee of a competitor, and the employment agreement included a provision for the payment of any legal fees regarding his new employment. Cenveo v. Southern Graphic Systems, 2010 U.S. Dist. LEXIS 104201 (D. Minn. June 18, 2010). The court held that this provision indicated that the employer defendant anticipated litigation when hiring the competitor’s former employee, well before the filing of a complaint. In other cases, the duty was triggered upon receipt of a demand or preservation letter from opposing counsel before the filing of a complaint (D’Onofrio v. SFX Sports Group., Inc., No. 06-687 (D.D.C. Aug. 24, 2010)), and in another case, by receipt of a notice of claims from the EEOC (Siana v. State Univ. of NY, 2010 U.S. Dist. LEXIS 82562 (E.D.N.Y. Aug. 10, 2010). Accurately determining when the duty to preserve is triggered will continue to be a thorny problem, and resolving it requires clear and quick lines of communication between business units and legal to identify a triggering event and to respond promptly and properly.
Litigants also continue to struggle with the conflict between their e-discovery obligations and the privacy laws of foreign jurisdictions. In at least seven cases in 2010, litigants claimed that the privacy laws of foreign jurisdictions blocked the production of information in U.S. proceedings. In all but one of these cases, the court ordered the production notwithstanding the laws of the foreign jurisdiction to the contrary. This will continue to be a significant challenge for entities operating in both the U.S. and foreign jurisdictions.
Finally, courts and litigants are encountering novel problems with technological innovation and the ESI that it creates. This is seen in the number of cases involving social media and personal web-hosted email accounts. The number of people using social media sites, such as Facebook, MySpace, Twitter and the like, has increased exponentially. The ESI posted to these sites is being sought more often in litigation. This is similar to issues faced when seeking discovery of a person’s personal email hosted by a third party provider, such as Gmail or Yahoo!. Another development in 2010 is the increase in the number of cases in which parties seek discovery of the identities of individuals who are known to such parties only by an email address, blog pseudonym or IP address. All of these issues relate to the reasonable expectation of privacy and what information should be kept out of the reach of litigants. The law concerning the reasonable expectation of privacy is outdated and at odds with the expectations of a growing segment of the population. The 2010 cases on privacy and ESI show how courts are struggling with and conflicting over these issues, and it will be interesting to see how the law in this area continues to develop.
This is also true of the Stored Communications Act. ESI on social media sites and in private web-hosted email accounts, as well as data in the hands of Cloud Computing providers, are usually subject to the SCA. However, the SCA is lamentably outdated and was written years before most of these technological developments even existed. Many courts, and even the Supreme Court this year, are struggling to put new wine in old bottles, with conflicting and confusing results. As more ESI is hosted by third parties, such as through Cloud Computing, the burden on litigants and these third parties will continue to grow as long as the law concerning this kind of data remains unclear. There is some effort afoot to convince Congress to update the SCA, but until it does, this will continue to be a difficult problem.
2010 Trends in Sanctions
As noted above, the overall trend in 2010 e-discovery cases shows that the cases where sanctions were sought declined slightly (by about 4%) from 2009 and were also awarded less frequently (a decline of about 8%) than in 2009. There was also a corresponding decline in every type of sanction in 2010 (see chart above). Our analysis of these cases shows that litigants and their counsel continue to struggle with accurately identifying a triggering event (one that triggers the duty to preserve) and responding properly.
The factors that courts consider when determining whether to impose sanctions, and of what kind, is becoming clearer, even if those factors differ somewhat among jurisdictions. It is fairly well-settled that sanctions may be awarded when a party has a duty to preserve evidence, it fails to do so, the evidence is relevant to the litigation, and the opposing party is prejudiced by its loss. See, e.g., Pension Committee, 2010 U.S. Dist. LEXIS 4546, at *13; Rimkus, 2010 U.S. Dist. LEXIS 14573, at *13; Victor Stanley II, 2010 WL 3703696, at *16. The spoliator’s level of culpability resulting in the loss is also an important factor, and this is where the conflict among jurisdictions arises. Judge Schiendlin in Pension Committee, Judge Rosenthal in Rimkus, and Judge Grimm in Victor Stanley II, discuss these differences at length, and we refer you to those very helpful opinions. But, as our discussion below shows, the factor that drove the outcome of most of the 2010 failure-to-preserve cases was not the level of culpability of the spoliating party (except in the most egregious of circumstances), but the prejudice or harm to the aggrieved party.
The most common sanctions awarded in 2010 were monetary sanctions, usually in the form of fees and costs associated with the discovery issue in dispute (29 cases or 60% of the cases in which sanctions were awarded). For those cases involving the failure to preserve, litigants should note that the duty may be triggered well before litigation is filed. As noted above, in Cenveo the court held that the duty to preserve was triggered by the defendant company’s agreement to pay its prospective employee’s legal fees that could arise from a dispute with plaintiff former employer. In Crown Castle USA, Inc. v. Fred A. Nudd Corp., 2010 U.S. Dist. LEXIS 32982 (W.D.N.Y. Mar. 31, 2010), the court found that the parties reasonably anticipated litigation when they considered filing a claim with their insurance carrier and started labeling documents as protected attorney work product. In Field Day, LLC v. County of Suffolk, 2010 U.S. Dist. LEXIS 28476 (E.D.N.Y. Mar. 25, 2010), the court held that the duty to preserve was triggered by the plaintiff’s notice of claims against the County several weeks prior to filing a formal complaint. These cases stress the importance of properly identifying a triggering event and taking reasonable steps to preserve relevant evidence. This requires clear lines of communication between business units and legal regarding possible triggering events. It also requires a clearly defined protocol to analyze the triggering event so that relevant sources of evidence are preserved for the proper time frames. Finally, it requires an understanding of how a party’s actions can affect the duty to preserve (such as filing a notice of claim with an insurance carrier, or labeling documents as protected attorney work product).
In addition to awarding monetary sanctions for parties failing to meet their duty to preserve, courts continued to award costs and fees for egregious conduct, whether on the part of the party, counsel, or both. See Coleman-Hill v. Governor Mifflin School Dist., 2010 U.S. Dist LEXIS 118113 (E.D. Pa. Nov. 4, 2010) (awarding school district costs and fees and admonished plaintiff’s counsel for “self-help” by issuing a subpoena to the school district’s IT director after being dissatisfied with school district’s discovery responses); Amerisource Corp v. RX USA Int'l., 2010 U.S. Dist. LEXIS 67108) (E.D.N.Y. July 6, 2010) (ordering defendant to pay $100,000 to the plaintiff and the court for defendant's fabrication of key emails); In re A&M Florida Properties v. American Federated Title Cor., 2010 Bankr. LEXIS 1217 (S.D.N.Y. Apr. 7, 2010) (ordering party and counsel to split the fees and costs for the motion due to purposeful delays and other egregious discovery conduct).
While the number of sanctions sought and awarded overall was lower than the prior year, courts did not shy away from awarding more severe sanctions when justified. Adverse inferences were issued in seven cases, and the slightly less severe sanction of evidence preclusion was awarded in three cases. Again, the failure to preserve is the source of many of these sanctions. Worth noting is that, under the right circumstances, mere negligence in complying with this duty can result in an adverse inference instruction to the jury when the prejudice to the aggrieved party is severe. In Kwon v. Costco Wholesale Corp., 2010 U.S. Dist. LEXIS 13614 (D. Haw. Feb 17, 2010), the court found no evidence that the defendant engaged in bad faith when a surveillance tape was overwritten, but nonetheless ordered an adverse inference instruction because the defendant had a duty to preserve, the tape was highly relevant as it allegedly recorded the accident at issue, and its destruction severely prejudiced the plaintiff. Likewise, in Melendres v. Arpaio, 2010 U.S. Dist. LEXIS 20311 (D. Arix. Feb 12, 2010), a putative class action arising from the controversial immigration enforcement practices of the Maricopa (AZ) County Sheriff’s Office, the court ordered an adverse inference to be issued with the content of the inference to be determined after the close of discovery, although no bad faith was found in the routine destruction of potentially relevant evidence by members of the Sheriff’s office, who asserted that they had never been advised of their duty to preserve. Another law enforcement agency found itself facing a similar sanction in Casale v. Kelly, 710 F. Supp. 2d 347 (S.D.N.Y. 2010) where the court found that, while the NYPD’s destruction of certain reports was mere negligence, plaintiffs had proved the relevance of said reports and the prejudice resulting from their loss. The court awarded an adverse inference instruction. Again, this shows that in cases where egregious conduct is not alleged, the prejudice to the aggrieved party rather than the level of culpability may be the critical factor in determining an appropriate sanction.
Adverse inference instructions were not confined to cases where parties failed to preserve. Courts also awarded these sanctions where parties failed to properly supervise and manage the preservation process. For example, in Harkabi v. SanDisk Corp., 2010 U.S. Dist. LEXIS 87483 (S.D.N.Y. Aug. 23, 2010), the defendant properly issued a litigation hold but then failed to sufficiently monitor compliance, resulting in the destruction of relevant data. And, in Antonio v. Security Services of America, LLC, 2010 U.S. Dist. LEXIS 72148 (D. Md. July 19, 2010), the defendant failed to issue a proper litigation hold and then allowed employees to self-select which documents would be produced, resulting in spoliation of relevant evidence. This highlights the importance not only of properly recognizing a triggering event and issuing an appropriate litigation hold, but also of monitoring and supervising compliance.
Employee self-selection of documents also was sanctioned in Jones v. Bremen High School Dist. 228, 2010 U.S. Dist. LEXIS 51312 (N.D. Ill. May 25, 2010), albeit by the slightly lesser sanction of evidence preclusion. In this fairly typical employment dispute, the defendant high school failed to preserve relevant information upon receipt of plaintiff’s EEOC claim. When it did issue a litigation hold, the hold was limited to three supervisory employees. The defendant then allowed those employees to search for and select relevant documents, despite the fact that at least one of them was the subject of most of the plaintiff’s complaints. The court noted, “[I]t is unreasonable to allow a party’s interested employees to make the decision about the relevance of such documents, especially when those same employees have the ability to permanently delete unfavorable email from a party’s system.” Id. at *22. The court went on to note that most non-lawyer employees are not knowledgeable enough to make determinations of relevancy and that “employees are often reluctant to reveal their own mistakes or misdeeds.” However, the court did not find any evidence that the defendant had made any deliberate effort to conceal harmful evidence. So, the Court agreed to a jury instruction that the defendant had a duty to preserve but failed to do so for more than a year after the duty was triggered, and precluded defendant from arguing that the lack of discriminatory statements from that time period was evidence that no such statements were made. These cases illustrate the risks of allowing custodians to identify potentially relevant information without reasonable oversight, especially when they are critically involved with the issues in the matter.
In 2010, courts continued to reserve the most severe sanctions of termination or default judgment to cases where litigants engaged in particularly egregious discovery conduct, awarding terminating sanctions in seven cases. This conduct was not confined to defendants, but also included plaintiffs’ misconduct, as evidenced by cases like Aliki Foods, LLC v. Otter Valley Foods, Inc. , 2010 U.S. Dist. LEXIS 68932 (D. Conn. July 7, 2010) and Peal v. Lee, 2010 Ill. App. LEXIS 760 (July 30, 2010). Aliki’s repeated and flagrant violations of the court’s discovery orders compelled the court to turn to the “last resort” of dismissal; while Peal’s case was dismissed after he deliberately destroyed evidence (running programs like “File Shredder” on his computer before turning it over to defendants pursuant to the court’s order) and then lied about it, suggesting “innocent” reasons for doing so that were contradicted by subsequent forensic examination.
One particularly notable case where terminating sanctions were awarded against a defendant was Maggette v. BL Development Corp., 2010 U.S. Dist. LEXIS 91647 (N.D. Miss. Sept. 2, 2010). The case involved an accident in which several people died while being transported to a Harrah’s casino by a bus company that contracted with Harrah’s. Harrah’s allegedly engaged in calculated delay and subterfuge in the discovery process. The court stated that it believed the defendants did so because they had concluded that whatever discovery sanctions they might face would be preferable to a finding of liability. While it is clear from the opinion that the court suspected Harrah’s bad faith for some time, it was not until the court took the extraordinary step of appointing an e-discovery special master that evidence of Harrah’s misconduct became clear. The court found it “quite difficult…to accept that a multi-billion dollar corporation facing high-stakes litigation was unable – for close to five years – to uncover its own documents at its own facilities when the special master was able to do so with ease almost immediately.” Id. at 23. The court awarded plaintiff judgment on the question of agency between the casino and the bus company, thus leaving only the question of the bus company’s negligence for the jury to decide.
While the cases where sanctions were awarded are helpful in providing guidance, some of the cases where sanctions were not awarded are also illuminating. In Pitney Bowes Government Solutions, Inc. v. United States, 94 Fed. Cl. 1 (2010), a bid protest, Pitney Bowes argued that the Department of Justice spoliated evidence when the contracting officer ordered the destruction of certain evidence relevant to the contract at issue. However, the evidence was later recovered from backup tapes. While agreeing that it was “error” by the contracting officer to order the destruction, the court noted that the question of spoliation was mooted by the fact that the evidence in question was “never in fact destroyed.” Conversely, there was ample evidence that the defendant destroyed documents in Siani v. State University of New York at Farmingdale, 2010 U.S. Dist. LEXIS 82562 (E.D.N.Y. Aug. 10, 2010), but the pro se plaintiff made no showing that the destroyed documents were relevant to his case, so no sanctions were awarded. This highlights the point that, even when relevant evidence is lost, it is critical to a charge of spoliation that the lost evidence was relevant and that the aggrieved party was prejudiced by its loss.
One final note regarding the Siani case: as in Crown Castle, discussed above, the court found that the defendant’s duty to preserve was triggered by a claim of work product protection. The defendant claimed that the duty to preserve was not triggered until the plaintiff filed his lawsuit in January 2009. But the defendant listed documents on its privilege log for which it claimed work product protection dated more than a year prior to the filing of the complaint. The court noted that work product protection can only arise when a document is created in anticipation of litigation, and claiming that protection was evidence that the defendant’s duty to preserve was triggered a year prior to the filing of the complaint. This opinion highlights the point that it is critical to coordinate claims of when a triggering event occurred with claims of when work product was created initially.
2010 Trends in Cooperation and Proportionality
While the 2010 sanctions opinions reveal that litigants continue to struggle with the duty to preserve, they also show advances by the bench and the bar in developing and applying reasonable and proportional approaches to e-discovery. Courts continue to stress the importance of reasonable and fair resolutions to discovery disputes that balance the need for production with the burden of searching ESI, and litigants seem to be responding. This is evidenced by a number of cases where litigants and the courts are limiting discovery to specific custodians, specific periods of time, and/or limited and targeted search terms. See, e.g., Edelen v. Campbell Soup Co., 265 F.R.D. 676, 684-85 (N.D. Ga. 2010) (allowing party to use its own proposed criteria to search ESI after opposing party moved to compel search of fifty-five custodians using fifty search terms over a three year period); Barrera v. Broughton, 2010 U.S. Dist. LEXIS 103491 (D. Conn. Sept. 30, 2010) (rejecting plaintiff’s request for production of ESI from forty custodians over a six year period and ordering production from three custodians over a three year period). Moreover, the party who adopted the most reasonable and proportional position on the searching and production of ESI in a discovery dispute tended to prevail. See e.g., Multiven, Inc. v. Cisco Systems, Inc., 2010 U.S. Dist. LEXIS *71221, * (N.D. Cal. July. 9, 2010) (ruling in favor of defendant who offered to split the cost of a third-party vendor to assist plaintiff even though under no duty to do so).
Courts are also showing greater willingness to order the use of iterative searches and sampling techniques to identify the most effective search criteria by reviewing a small sample of ESI before conducting a broader search to identify all relevant documents. Barrera, 2010 U.S. Dist. LEXIS 103491 (ordering phased search of ESI to begin with three of the forty custodians requested by party seeking discovery); Makrakis v. DeMelis, 2010 Mass. Super. LEXIS 223 (Mass. Sup. Ct. July 13, 2010) (allowing party seeking search of ESI on twenty-two years of backup tapes for thirteen custodians to obtain an initial sampling from the backup tapes to determine whether broader search was justified). Recent improvements in advanced search technologies, sampling and computer-assisted review (or predictive coding) have made this type of phased approach a viable option for many litigants.
Courts continue to press litigants and counsel to work cooperatively to determine the proper scope, and limit the costs, of e-discovery, often citing and endorsing the principles set forth in the Cooperation Proclamation issued by The Sedona Conference® in 2009. See e.g., Tamburo v. Dworkin, 2010 U.S. Dist. LEXIS 121510, at *10 (N.D. Ill. Nov. 17, 2010) (citing the Cooperation Proclamation and ordering the parties “to actively engage in cooperative discussions to facilitate a logical discovery flow.”); Home Design Servs., Inc. v. Trumble, 2010 WL 1435382, at *5 (D. Colo. Apr. 9, 2010) (quoting Cooperation Proclamation and stating that counsel "bear a professional responsibility to conduct discovery in a diligent and candid manner"); Cartel Asset Mgmt v. Ocwen Fin. Corp., 2010 WL 502721, at *14 (D. Colo. Feb. 8, 2010) (instructing counsel "to work together consistent with . . . The Cooperation Proclamation"). Given the clear trend of courts actively promoting cooperation, litigants are well advised to begin discussing and negotiating e-discovery issues with opposing parties as early as possible in litigation.
One of the most significant developments in cooperation in the e-discovery context has resulted from the difficulty we have noted regarding the duty to preserve. The 2010 cases have shown an increase in the number of negotiated ESI protocols. Although many such agreements appeared in the 2009 e-discovery cases, a few of the 2010 agreements included provisions that define the scope of ESI a party will preserve. See United States v. Louisiana Generating, LLC, 2010 U.S. Dist. LEXIS 20207, *2-11 (M.D. La. Mar. 5, 2010) (stipulated preservation order excluding eleven categories of data, including deleted computer files, from the duty to preserve); In re: Yasmin and Yaz (Drospirenone) Marketing, Sales Practices and Products Liability Litigation, 2010 U.S. Dist. LEXIS 14092, *1-11 (S.D. Ill. Feb. 10, 2010) (preservation order limiting the categories of documents and data that plaintiffs in class action have a duty to preserve). These “preservation orders” help reduce the uncertainty and risks that surround the question of what ESI should be preserved, for how long, and under what circumstances. Given the magnitude of sanctions that courts have awarded when ESI was not properly preserved, litigants should evaluate the possibility of a preservation agreement in appropriate circumstances.
Foreign Jurisdictions and Blocking Statutes
One of the challenges litigants faced in 2010 was the interaction between discovery obligations under U.S. law and their privacy obligations imposed by foreign jurisdiction. U.S. courts are rarely sympathetic to a litigant’s claim that producing evidence in a U.S. court is prohibited by foreign privacy laws. See Devon Robotics, et al. v. Deviedma, et al., 2010 U.S. Dist. LEXIS 108573 (E.D. Pa. Oct. 8, 2010) (ordering disclosure notwithstanding Italian blocking statute). In re: Air Cargo Shipping Services Antitrust Litig., 2010 U.S. Dist. LEXIS 75974 (E.D.N.Y. July 23, 2010) (ordering disclosure notwithstanding South African blocking statute); In re: Air Cargo Shipping Services Antitrust Litig., 2010 U.S. Dist. LEXIS 30598 (E.D.N.Y. Mar. 29, 2010) (ordering disclosure notwithstanding French blocking statute): Gucci America, Inc., et al., v. Curveal Fashion, 2010 U.S. Dist. LEXIS 20834 (S.D.N.Y. Mar. 10, 2008) (ordering disclosure notwithstanding Malaysian banking law): Accessdata Corp. v. Alste Technologies, 2010 U.S. Dist. LEXIS 4566 (D. Utah. Jan. 21, 2010) (ordering disclosure notwithstanding German blocking statute).
In making these determinations, the courts analyzed whether the information should be disclosed under the comity analysis enunciated in Societe Nationale Industrielle Aerospatiale v. United States District Court for the District of Iowa, 482 U.S. 522 (1987). In Aerospatiale, the Supreme Court identified five factors to guide a court’s comity analysis: the importance to the litigation of the documents or other information requested; the degree of specificity of the request; whether the information originated in the United States; the availability of alternative means of securing the information; and the extent to which noncompliance with the request would undermine important interests of the United States, or compliance with the request would undermine important interests of the state where the information is located. Aerospatiale, 482 U.S. at 544 n.28.
In the seven 2010 e-discovery cases involving foreign privacy laws, the courts examined the involved country’s blocking statute under the “undermining interests” factor and focused on the litigants’ arguments about the blocking statute itself. In Devon Robotics, the court noted that the defendant did not show the court how the Italian law would be violated in light of safeguards that the U.S. court could impose via a protective order. The court also noted that the defendant did not demonstrate how frequently the law is enforced and what penalties have actually been imposed for a violation. Devon Robotics, 2010 U.S. Dist. LEXIS 108573; see also In re: Air Cargo Shipping Services Antitrust Litig., 2010 U.S. Dist. LEXIS 30598, at *59 noting legislative history of French law and its purpose to work as a bargaining chip in foreign courts.
The one court that did prevent disclosure of information based its decision on the confidential nature of the documents at issue and the importance of the European Commission’s interests in protecting this confidentiality. In In re: Payment Card Interchange Fee and Merchant Discount Antitrust Litig., 2010 U.S. Dist. LEXIS 89275 (E.D.N.Y. Aug. 27, 2010), the court prevented the disclosure of two European Commission documents. The court found that the European Commission’s interest in confidentiality outweighed the plaintiff’s interest in discovery of these documents because the production of these particular documents could discourage the candor of individual parties involved in EU investigations. The court also noted that the plaintiffs had other avenues to obtain the information that was also contained in the documents originally requested.
What these cases tell us is that foreign companies attempting to resist the disclosure of information protected by foreign privacy laws will likely be compelled to produce the information. Companies that conduct business in the U.S. and foreign jurisdictions should carefully structure the custody and control of information protected in the foreign jurisdiction so that its production in the U.S. will be limited, and structure their privacy policies in the foreign jurisdiction to incorporate consent and other mechanisms to avoid penalties in the foreign jurisdiction for disclosure of private information.
Trends in Social Media
A significant trend in 2010 and, we believe, one that will be more important in the coming year, is ESI contained in web-based email accounts and social media sites or in the custody of other third-party providers. This third-party data can create significant challenges in planning e-discovery strategies, especially with the complications that occur because of the interaction of considerations of privacy as well as the out-dated Stored Communications Act and the conflicting interpretations of its requirements.
An individual’s privacy interest in personal email communications that are accessible through an employer’s computer systems were the subject of several cases in 2010. Here are some examples. In People of the State of New York v. Klapper, 2010 NY Slip Op. 20150 (N.Y. Crim. Ct. Apr. 28, 2010), the court dismissed a criminal complaint against an employer for using a key stroke capturing device on the employer’s computer that was assigned to an employee. By use of this device, the employer learned the password to the employee’s email account and accessed it. Id. at *6. The court held that there was no inherent right of privacy to the employee’s email such that accessing it rose to the level of unauthorized access, noting that the employer owned the computer and had some authority over the computer and, possibly, the email account. Id. at *5-6. Notwithstanding its ruling, the court noted that the criminal complaint and accompanying information did not state whether the email account was a work email account or a personal email account, leaving an open question as to whether the result would have been the same if the court had known it was a personal web-based, password protected account. Id. at *6.
However, in Stengart v. Loving Care Agency, Inc., 201 N.J. 300 (2010), the Supreme Court of New Jersey held that an employee’s emails to her attorney from a personal password-protected, web-based email account but sent from the employer’s computer were protected by the attorney-client privilege. Id. at 325. Even though the employer had an email policy in place that stated that any communications on the employer’s computer could be accessed by the employer, the court found that the employee took enough steps to protect her communications to her attorney to enforce the privilege. Id. This case is notable because even though the employer had a policy clearly stating that it could review the contents of any communication on its computer systems, the court held that this was not sufficient to overcome the employee’s expectation of privacy. This highlights the fact that companies should carefully consider their policies for collecting and reviewing ESI that might contain personal communications, and how that might affect subsequent litigation.
An employee’s expectation of privacy was perhaps most fully addressed in Ontario v. Quon, 560 U.S. ____ (2010). In this case, Quon was an employee of the city of Ontario, California’s SWAT team. The City provided alphanumeric pagers to its SWAT team members to communicate with them. The City contracted with Arch Wireless to provide both the pagers and the paging services. Quon had no contractual relationship with Arch Wireless. The City limited the number of characters sent and received by the pagers that it would pay for. Any overages were paid for by the employee. Quon repeatedly exceeded the monthly limit, and paid for the excess usage. A City supervisor performed an audit of the overages of Quon and other employees to determine whether the limit should be increased.
In performing the audit, the supervisor requested and obtained transcripts of the messages sent and received by Quon and other employees from Arch Wireless. Upon review of these transcripts, the supervisor determined that Quon violated City policies about pager usage and referred him to discipline. Quon sued the City claiming that it had violated the Fourth Amendment through an unreasonable search and sued Arch Wireless claiming that it had violated the Stored Communications Act by disclosing the contents of the stored pager communications. A jury found that, while Quon had a reasonable expectation of privacy in the communications, the supervisor’s purpose was legitimate and there was no Fourth Amendment violation. It did find, however, that Arch Wireless had violated the Stored Communications Act. The Ninth Circuit reversed, finding that there was a reasonable expectation of privacy, but that the search was not properly limited in scope. It left in place the ruling that Arch Wireless had violated the SCA.
When the Supreme Court granted cert, it had the opportunity to provide much needed guidance on an employee’s reasonable expectation of privacy regarding personal communications using an employer’s electronic communication systems and on the meaning of the SCA. As the number and variety of media that employees use for personal communications continues to increase, e-discovery practitioners face significant challenges determining how to deal with these personal communications in litigation. These challenges are rooted in a reasonable expectation of privacy and in the scope of the SCA. As noted above, the SCA is more than 20 years old and does not address most of the technologies that now exist. Cases interpreting the SCA conflict across jurisdictions, and courts struggle to twist the requirements of the SCA to apply it to these new technologies.
Unfortunately, in deciding Quon. the Supreme Court did not provide significant guidance regarding the reasonable expectation of privacy and did not grant cert regarding the SCA in any respect. This leaves in place the Ninth Circuit’s ruling that a communications provider, like Arch Wireless, violates the SCA when it provides the content of stored communications to the account holder without the consent of one of the parties to the communication (or unless another exception applies). Suppose that the City was involved in a case where the contents of the pager messages were sought through discovery. Under the Ninth Circuit’s reasoning. it could not provide those contents without the consent of one of the parties to the communication or pursuant to court order.
The Supreme Court in Quon assumed without deciding that Quon did have a reasonable expectation of privacy in the pager communications. It is unfortunate that the Court did not decide this issue directly, as litigants continue to struggle with the proper scope of privacy expectations in personal communications at work. This struggle leads to conflicting court opinions and thus to uncertainty as to how an entity should establish policies and procedures regarding them. However, the Court did recognize that the growth in the volume and variety of electronic communications was having an impact on society and affecting its conception of privacy. The Court stated:
The judiciary risks error by elaborating too fully on the Fourth Amendment implications of emerging technology before its role in society has become clear. In Katz, the Court relied on its own knowledge and experience to conclude that there is a reasonable expectation of privacy in a telephone booth. See Katz v. United States, 389 U. S. 347, 360-361 (1967) (Harlan, J., concurring). It is not so clear that courts at present are on so sure a ground. Prudence counsels caution before the facts in the instant case are used to establish far-reaching premises that define the existence, and extent, of privacy expectations enjoyed by employees when using employer-provided communication devices. Rapid changes in the dynamics of communication and information transmission are evident not just in the technology itself but in what society accepts as proper behavior…. At present, it is uncertain how workplace norms, and the law’s treatment of them, will evolve. Quon, at 10.
Another area where the law continues to develop concerns ESI on social media sites. Some courts in 2010 allowed discovery of the content of individuals’ social media pages. See EEOC v. Simply Storage Management, LLC, 2010 U.S. Dist. LEXIS 52766, at * (S.D. Ind. May 11, 2010) (requiring plaintiff to produce content from the individuals’ Facebook pages that was relevant to the lawsuit and limited to specific time period). However, other courts have determined that at least parts of social media sites are protected from disclosure by the SCA. See Barnes v. CUS Nashville, LLC, 2010 U.S. Dist. LEXIS 52263, at *2-3 (M.D. Tenn. May 27, 2010) (holding that disclosure of a non-party witness’s Facebook information was prohibited by the SCA); Crispin v. Christian Audiger, Inc., 2010 U.S. Dist. LEXIS 52832, at *78 (C.D. Cal. May 26, 2010) (holding that private communications on Facebook and MySpace are protected from disclosure by the SCA but leaving open the question of whether “wall posts” or “comments” would also be protected from disclosure depending on the individual’s privacy settings). Because there is no consensus concerning whether social media content is protected from disclosure, parties should discuss how they will handle such information at the outset of litigation as part of an overall ESI protocol.
An analysis of the 2010 e-discovery cases shows that, on the whole, litigants and their counsel are getting better at conducting e-discovery. Sanctions are down for the first time since the amendments to the Federal Rules of Civil Procedure in 2006, and the use of reasonable, iterative and proportional discovery protocols is rising, often incorporating preservation and privilege protection provisions and taking advantage of better search and review technologies. However, litigants continue to struggle with properly recognizing and responding to circumstances that trigger a duty to preserve, and with ESI in the hands of third parties.
For more information about this topic, please contact the authors or any member of the Williams Mullen e-Discovery and Information Governance Team.
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