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.
Showing posts with label adverse inference. Show all posts
Showing posts with label adverse inference. Show all posts
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, May 17, 2010
E-Discovery Basics: Zubulake V
The fifth and final decision of the Zubulake case was released in the summer of 2004, and it was a shocker.
(For background on Zubulake, please see my discussion in these four earlier posts.)
Zubulake had an effect on my world - it didn't exactly rock it, but it changed the way many legal departments viewed electronic discovery, including the department where I worked at Bear, Stearns & Co.
Some personal background: in early 2003, I had started working in the litigation group of the Bear Stearns Legal Department, just as the Zubulake decisions were being released. We read the Zubulake decisions as the judge issued them. The fifth Zubulake ruling worried a whole lot of people.
Why?
Well, the "adverse inference instruction" is why - the atomic bomb of the litigation world.
What happened here?
When Zubulake's legal team re-deposed certain UBS employees, as ordered by the judge in Zubulake IV, they found out about many more emails: emails that were improperly deleted and emails that were supposed to have been given to Zubulake almost two years earlier.
Even worse for UBS, the depositions showed that the deleted emails were important to the case, and they had been lost, forever. The back-up tapes that held copies of these emails were gone too.
The depositions also revealed that UBS had other emails important to Zubulake's case, but never turned them over to her.
Zubulake asked the judge for an adverse inference instruction to the jury. For the judge to grant this request, UBS had to have an obligation to preserve relevant evidence which was lost or destroyed, and it had to do so with a "culpable state of mind". In the court's jurisdiction, a "culpable state of mind" included not only willful or reckless behavior, but also negligence (although Zubulake then had to prove that the evidence lost was relevant to her case).
Ultimately, the judge found that UBS counsel did not do everything it should have done to preserve evidence, and that UBS employees also ignored much of the advice given to them by their counsel. Therefore, the judge decided that UBS willfully lost the evidence, and that under the legal standard, the lost information was presumed to be not only relevant to the Zubulake case, but favorable to Zubulake. The jury was instructed of this decision by the judge.
How did the case end? The jury awarded Zubulake almost $30 million in damages for her gender discrimination claim: about $10 million in compensatory damages, and about $20 million in punitive damages. A nice outcome for Zubulake, and not so nice for UBS.
Next week, I'll talk about my reactions to the Zubulake case, and some of the lessons learned...
(Zubulake V is cited as: Zubulake v. UBS Warburg, 229 F.R.D. 422 (S.D.N.Y. 2004))
(For background on Zubulake, please see my discussion in these four earlier posts.)
Zubulake had an effect on my world - it didn't exactly rock it, but it changed the way many legal departments viewed electronic discovery, including the department where I worked at Bear, Stearns & Co.
Some personal background: in early 2003, I had started working in the litigation group of the Bear Stearns Legal Department, just as the Zubulake decisions were being released. We read the Zubulake decisions as the judge issued them. The fifth Zubulake ruling worried a whole lot of people.
Why?
Well, the "adverse inference instruction" is why - the atomic bomb of the litigation world.
What happened here?
When Zubulake's legal team re-deposed certain UBS employees, as ordered by the judge in Zubulake IV, they found out about many more emails: emails that were improperly deleted and emails that were supposed to have been given to Zubulake almost two years earlier.
Even worse for UBS, the depositions showed that the deleted emails were important to the case, and they had been lost, forever. The back-up tapes that held copies of these emails were gone too.
The depositions also revealed that UBS had other emails important to Zubulake's case, but never turned them over to her.
Zubulake asked the judge for an adverse inference instruction to the jury. For the judge to grant this request, UBS had to have an obligation to preserve relevant evidence which was lost or destroyed, and it had to do so with a "culpable state of mind". In the court's jurisdiction, a "culpable state of mind" included not only willful or reckless behavior, but also negligence (although Zubulake then had to prove that the evidence lost was relevant to her case).
Ultimately, the judge found that UBS counsel did not do everything it should have done to preserve evidence, and that UBS employees also ignored much of the advice given to them by their counsel. Therefore, the judge decided that UBS willfully lost the evidence, and that under the legal standard, the lost information was presumed to be not only relevant to the Zubulake case, but favorable to Zubulake. The jury was instructed of this decision by the judge.
How did the case end? The jury awarded Zubulake almost $30 million in damages for her gender discrimination claim: about $10 million in compensatory damages, and about $20 million in punitive damages. A nice outcome for Zubulake, and not so nice for UBS.
Next week, I'll talk about my reactions to the Zubulake case, and some of the lessons learned...
(Zubulake V is cited as: Zubulake v. UBS Warburg, 229 F.R.D. 422 (S.D.N.Y. 2004))
Monday, May 10, 2010
E-Discovery Basics: Zubulake IV
In the last few weeks, I have been discussing the Zubulake case of 2003 and 2004. Background on the case can be found in my previous installments here, here and here. If you are not familiar with the case, it is worthwhile to review these earlier blog posts.
Picking up the story, a few months after issuing her third decision in the Zubulake case, Judge Scheindlin released her fourth decision.
UBS had been restoring back-up tapes related to the case and found that some tapes were missing.
Also, UBS discovered that emails important to the case had been deleted from the UBS email system, and were now available only on back-up tape. This was a problem, as UBS had told its employees to stop deleting any emails relating to this case.
Zubulake asked the judge to impose sanctions on UBS because of this issue.
The judge decided that UBS had a duty to preserve emails related to Zubulake, and that that this duty started when it seemed very likely that Zubulake would sue UBS.
The next question addressed was: preserve which emails? The judge decided that all documents relevant to the case belonging to "key players" had to be kept by UBS.
Zubulake had requested an "adverse inference instruction" from the judge. If granted, this would end the case, as UBS would have no reasonable option but to settle with Zubulake. An adverse inference instruction is extreme - a judge tells a jury to assume that if one side destroyed evidence, then this evidence must have been very harmful to that side's case.
Judge Scheindlin decided that Zubulake could not show that the lost evidence would have supported her claims, and so she would not issue an adverse inference instruction. However, UBS did have to cover Zubulake's cost for re-deposing some witnesses on issues raised by the missing back-up tapes.
Next week, I'll wrap up my discussion of the Zubulake case.
(Zubulake IV is cited as: Zubulake v. UBS Warburg, 220 F.R.D. 212 (S.D.N.Y. 2003))
Picking up the story, a few months after issuing her third decision in the Zubulake case, Judge Scheindlin released her fourth decision.
UBS had been restoring back-up tapes related to the case and found that some tapes were missing.
Also, UBS discovered that emails important to the case had been deleted from the UBS email system, and were now available only on back-up tape. This was a problem, as UBS had told its employees to stop deleting any emails relating to this case.
Zubulake asked the judge to impose sanctions on UBS because of this issue.
The judge decided that UBS had a duty to preserve emails related to Zubulake, and that that this duty started when it seemed very likely that Zubulake would sue UBS.
The next question addressed was: preserve which emails? The judge decided that all documents relevant to the case belonging to "key players" had to be kept by UBS.
Zubulake had requested an "adverse inference instruction" from the judge. If granted, this would end the case, as UBS would have no reasonable option but to settle with Zubulake. An adverse inference instruction is extreme - a judge tells a jury to assume that if one side destroyed evidence, then this evidence must have been very harmful to that side's case.
Judge Scheindlin decided that Zubulake could not show that the lost evidence would have supported her claims, and so she would not issue an adverse inference instruction. However, UBS did have to cover Zubulake's cost for re-deposing some witnesses on issues raised by the missing back-up tapes.
Next week, I'll wrap up my discussion of the Zubulake case.
(Zubulake IV is cited as: Zubulake v. UBS Warburg, 220 F.R.D. 212 (S.D.N.Y. 2003))
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