E-Discovery - Do The Right Thing!

FindLaw

By Eric Sinrod

December 1 is almost here. Why is that date significant in the legal world? Because, on that date, amendments to the Federal Rules of Civil Procedure will be taking effect. The rules will govern electronic discovery - and, in theory, are supposed to reduce litigation costs.

As it turns out, however, the rules may actually increase litigation costs, especially regarding work that must be performed within the first 120 days after a lawsuit has commenced. Plus, if a party gets it wrong by not properly producing electronic discovery, the resulting penalties can be gargangtuan, as already demonstrated in some recent cases.

The new rules are designed to set out early structure, uniformity and predictability when it comes to e-discovery. Yet, from the very start of a case, the parties need to start evaluating with their IT teams and outside counsel what they need to do to produce relevant electronic data. That effort can be enormous, as data can be located live on a network across multiple servers, on backup tapes, on hard drives, laptops, and PDAs.

It is true that parties still will be able to argue that the evidentiary value of particular categories of electronic evidence is outweighed by the burden of searching, retrieving and producing that information. However, the magistrate, discovery referee or judge who is assigned to adjudicate discovery disputes on a given case may not agree.

And, the failure to produce relevant electronic evidence, when truly required, can lead to dire consequences. A recent case provides such an illustration.

In the case of z4 Technologies v. Microsoft Corporation, according to a decision by a federal judge in Texas, a defense witness revealed at a deposition that took place immediately before trial that an email he had sent to others at Microsoft had been provided to Microsoft attorneys more than a year before the deposition.

Nevertheless, as found by the judge, Microsoft had withheld production of the email until responses to deposition questions revealed the existence of the email. Once revealed, the judge determined that the email was favorable to the plaintiff's position - which did not help the cause of the defense in dealing with its failure to produce.

Compounding this problem, the judge's decision points out that Microsoft failed to correct deposition testimony from eight months before trial that stated that an alleged database did not exist, and that Microsoft neglected to specifically apprise the plaintiff that the database could be located in a sub-folder on a particular CD that had been produced.

As a result of this and other (mis)behavior, the federal judge concluded that there had been litigation misconduct by the defense. Such litigation misconduct translated into a severe financial penalty.

The judge specifically ordered Microsoft to pay additional damages of $25 million, as well as almost $2 million in attorney's fees to the plaintiff. The judge noted that while he did not do so, he had the discretion to award triple the jury's verdict because of the litigation misconduct, which would have amounted to an extra $345 million in damages.

Microsoft, obviously, is a sophisticated technology company - yet, even it got it wrong when it came to electronic discovery in the z4 case. If Microsoft can get it wrong, it does not take a lot of grey matter in one's head to understand that less sophisticated companies likewise can get it wrong. Yet, unlike Microsoft, such companies may not have the financial wherewithal to pay extra high level damages for e-discovery mistakes.

The witching hour of December 1 is almost here. Companies would be smart to start working now, if not have doing so already, with counsel who are skilled in the e-discovery arena. Such counsel can develop a plan with clients to help ensure that relevant electronic data is preserved, searchable, and ready to be retrieved and produced in as economically efficient manner as possible.

Who you gonna call? - the e-discovery busters!

Eric Sinrod is a partner in the San Francisco office of Duane Morris LLP (http://www.duanemorris.com) where he focuses on litigation matters of various types, including information technology and intellectual property disputes. His Web site is http://www.sinrodlaw.com and he can be reached at ejsinrod@duanemorris.com. To receive a weekly email link to Mr. Sinrod’s columns, please send an email to him with Subscribe in the Subject line.

This column is prepared and published for informational purposes only and should not be construed as legal advice. The views expressed in this column are those of the author and do not necessarily reflect the views of the author’s law firm or its individual partners.

Electronic Discovery