This week, I'd like to define the term 'spoliation'. If you are not familiar with the word, you may have to be a little careful - you could mispronounce it. It's not 'spoil-ation' (which isn't a word, according to the Merriam-Webster dictionary), but 'spo-li-ation'.
'Spoliation' is related to the word 'spoil', however, and its first definition comes from the Latin word for 'plundering'.
We are more interested in its second definition, which is to alter a document so that evidence is lost, destroyed, or even just changed.
Spoliation is a bad thing - it can be done intentionally or negligently, and it can be a criminial act.
Spoliation can occur quite often in the electronic discovery context. It usually happens to metadata.
What is metadata? 'Metadata' is data about data. For example, most electronic documents have a creation date, the name of the document's author, the date the document was last saved, etc. All of this is considered 'metadata'.
If the contents of an electronic document are changed (such as text in the body of an email), this is clearly spoliation. However, if even the creation date of a document is changed, this is also considered spoliation.
Why is spoliation important in e-discovery? Spoliation can lead to a judge imposing sanctions or even giving adverse inference instructions to a jury, which, as we have seen, can be devastating.
In my experience, the problem with spoliation usually arises in the context of restoring electronic documents from back-up media such as back-up tapes. It is very possible that some of the metadata is changed in the restoration process. I've found that if spoliation has occured, it is usually the document's creation date that is changed, and it is changed to the restoration date.
For example, an email may be written and sent on 1/1/2005. Its creation date is therefore 1/1/2005. At some point, the email is backed up into an archive. If the email is restored from the archive on 6/25/2009, and the email's creation date is changed from 1/1/2005 to 6/25/2009, then this is spoliation.
Spoliation can happen this way quite often - many regulators and judges are familiar with the problem, and may allow minor spoliation of documents turned over to the court or to the other side, so long as the original archive copy of the data is clean and unaltered.
However, being aware of the situation and notifying the court or the other side is extremely important in this case. Handing over data that has undergone spoliation, and not telling the recipient, is a recipe for disaster.
Friday, June 25, 2010
Monday, June 14, 2010
E-Discovery Background: The Billion-Dollar Verdict
This week, I will talk briefly about e-discovery's "billion-dollar verdict."
In 2005, a Florida court sanctioned investment bank Morgan Stanley in the case of Morgan Stanley & Co. v. Coleman Holdings Inc. In 1998, billionaire Ronald Perelman sold his majority share in camping equipment company Coleman, in exchange for Sunbeam stock. After Sunbeam went bankrupt in 2001, Perelman sued Morgan Stanley, claiming he was fooled into accepting the Sunbeam shares.
The judge sanctioned Morgan Stanley for not turning relevant emails over to Perelman. Because of this punishment, Perelman did not have to show he was damaged by the deal. Instead, he had to prove only that he relied on Morgan Stanley's advice on the Coleman-Sunbeam transaction.
After a trial, the jury returned a $1.5 billion verdict for Perelman. This included over $600 million in actual damages, and over $850 million in punitive damages!
This verdict was a shock to the financial world. A billion-dollar decision, because of e-discovery issues! The result drew even more attention to electronic discovery and its importance.
Years later, a Florida appeals court reversed the decision - Morgan Stanley wasn't able to present a defense in the case. But the original verdict put the fear of liability into a lot of people. It showed that e-discovery issues matter.
(And, on an unrelated note, some World Cup congratulations go out to: the U.S. team, for holding England to a draw; the German team, for the crushing defeat of Australia; and the Swiss team, for the shocking upset of Spain!)
In 2005, a Florida court sanctioned investment bank Morgan Stanley in the case of Morgan Stanley & Co. v. Coleman Holdings Inc. In 1998, billionaire Ronald Perelman sold his majority share in camping equipment company Coleman, in exchange for Sunbeam stock. After Sunbeam went bankrupt in 2001, Perelman sued Morgan Stanley, claiming he was fooled into accepting the Sunbeam shares.
The judge sanctioned Morgan Stanley for not turning relevant emails over to Perelman. Because of this punishment, Perelman did not have to show he was damaged by the deal. Instead, he had to prove only that he relied on Morgan Stanley's advice on the Coleman-Sunbeam transaction.
After a trial, the jury returned a $1.5 billion verdict for Perelman. This included over $600 million in actual damages, and over $850 million in punitive damages!
This verdict was a shock to the financial world. A billion-dollar decision, because of e-discovery issues! The result drew even more attention to electronic discovery and its importance.
Years later, a Florida appeals court reversed the decision - Morgan Stanley wasn't able to present a defense in the case. But the original verdict put the fear of liability into a lot of people. It showed that e-discovery issues matter.
(And, on an unrelated note, some World Cup congratulations go out to: the U.S. team, for holding England to a draw; the German team, for the crushing defeat of Australia; and the Swiss team, for the shocking upset of Spain!)
Monday, June 7, 2010
E-Discovery Basics: The 2006 changes to the FRCP
On December 1, 2006, the Federal Rules of Civil Procedure (FRCP) were changed, in an attempt to address electronic discovery.
(For the curious, the Rules which were changed were Rules 16, 26, 33, 34, 37 and 45, plus Form 35.)
For about ten years, the federal court system in the United States had struggled with how to handle electronic discovery, and the 2006 changes were an attempt to modernize the discovery process. The changes to the Federal Rules are significant because they are applied not only at the federal level, but also at the state level, as many states in the U.S. use the FRCP as a guideline for their own rules.
The 2006 changes defined the term "electronically stored information", and defined it broadly. (This term is sometimes shortened to "ESI".)
The term is meant to include any kind of information in electronic form.
Here is a brief summary of some of the changes:
- The rules require the parties to a lawsuit to discuss ESI when they meet to talk about the case (this is called the "meet-and-confer").
- The rules roughly adopted Judge Schiendlin's two-tiered system of reasonably accessible data and not reasonably accessible data.
- A "claw-back" procedure was established: if one party accidentally produced material that was subject to attorney-client privilege, the producing party can ask the other side to return or destroy the data.
- The rules created a "safe harbor" - a party usually cannot be sanctioned for not providing ESI that was lost or destroyed as part of the routine, good-faith operation of an ESI storage system.
The rule changes tried to address some of the major issues in electronic discovery:
- The court system wanted to encourage the parties to a lawsuit to be on the same page when dealing with ESI, and therefore they must talk about ESI when they meet and confer about the case, instead of ignoring the issue and then battling over electronic discovery later in the case.
- The drafters of the amendments wanted to encourage parties to quickly produce data; if they included privileged material by accident, the "claw-back" would (in theory) protect them. Of course, when this happens, the other side now has emails between an attorney and client, and can read them. They can't use or disclose the information, but they have it.
- The "safe harbor" was meant to calm some nerves: companies can destroy their data as part of their business routine. However, once a litigation hold is placed on the information, then the data can't be lost or destroyed.
The 2006 changes to the Federal Rules of Civil Procedure removed some uncertainty in the electronic discovery process. They weren't perfect, but they were a good attempt at modernizing the Rules.
(For the curious, the Rules which were changed were Rules 16, 26, 33, 34, 37 and 45, plus Form 35.)
For about ten years, the federal court system in the United States had struggled with how to handle electronic discovery, and the 2006 changes were an attempt to modernize the discovery process. The changes to the Federal Rules are significant because they are applied not only at the federal level, but also at the state level, as many states in the U.S. use the FRCP as a guideline for their own rules.
The 2006 changes defined the term "electronically stored information", and defined it broadly. (This term is sometimes shortened to "ESI".)
The term is meant to include any kind of information in electronic form.
Here is a brief summary of some of the changes:
- The rules require the parties to a lawsuit to discuss ESI when they meet to talk about the case (this is called the "meet-and-confer").
- The rules roughly adopted Judge Schiendlin's two-tiered system of reasonably accessible data and not reasonably accessible data.
- A "claw-back" procedure was established: if one party accidentally produced material that was subject to attorney-client privilege, the producing party can ask the other side to return or destroy the data.
- The rules created a "safe harbor" - a party usually cannot be sanctioned for not providing ESI that was lost or destroyed as part of the routine, good-faith operation of an ESI storage system.
The rule changes tried to address some of the major issues in electronic discovery:
- The court system wanted to encourage the parties to a lawsuit to be on the same page when dealing with ESI, and therefore they must talk about ESI when they meet and confer about the case, instead of ignoring the issue and then battling over electronic discovery later in the case.
- The drafters of the amendments wanted to encourage parties to quickly produce data; if they included privileged material by accident, the "claw-back" would (in theory) protect them. Of course, when this happens, the other side now has emails between an attorney and client, and can read them. They can't use or disclose the information, but they have it.
- The "safe harbor" was meant to calm some nerves: companies can destroy their data as part of their business routine. However, once a litigation hold is placed on the information, then the data can't be lost or destroyed.
The 2006 changes to the Federal Rules of Civil Procedure removed some uncertainty in the electronic discovery process. They weren't perfect, but they were a good attempt at modernizing the Rules.
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