Archive: December 2006

1
Court Orders Parties To Develop Sampling Protocol For Claims Information
2
Regulator Says Morgan Stanley Withheld E-Mail in Cases
3
Partners Vote to Create “K&L Gates”
4
BREAKING NEWS: U.S. Deputy Attorney General Paul J. Mcnulty Revises Charging Guidelines for Prosecuting Corporate Fraud
5
Court Sets Hearing for Plaintiff to Show Cause Why Complaint Should Not Be Dismissed With Prejudice as Sanction for Discovery Misconduct
6
Dawson Quoted in Widely Carried AP Article
7
Parties Agree That Responsive ESI To Be Collected From Defendant’s Active IT Environment, And Not From Backup Tapes
8
Court Enters Stipulated Electronic Discovery Plan and Order to Preserve Evidence
9
Nunn Appointed Chairman of Subcommittee to Consider E-Discovery Specific Changes to Washington Court Rules
10
Court Awards Full Costs of $20,472, Since Computer Forensics Experts Were “Particularly Necessary to Uncover Plaintiff’s Skulduggery”

Court Orders Parties To Develop Sampling Protocol For Claims Information

Zurich Am. Ins. Co. v. Ace Am. Reinsurance Co., 2006 WL 3771090 (S.D.N.Y. Dec. 22, 2006)

In this reinsurance case, plaintiff sought an order compelling defendant to produce certain claim information. Defendant opposed the motion partly on the basis of undue burden. It explained that, although it processed thousands of claims, its computer system was incapable of segregating claims by the amount of the claim, the type of claim, the identity of the cedent, or the reason the claim may have been denied. The court criticized the argument, stating: “A sophisticated reinsurer that operates a multimillion dollar business is entitled to little sympathy for utilizing an opaque data storage system, particularly when, by the nature of its business, it can reasonably anticipate frequent litigation.” At the same time, the court acknowledged that a search of defendant’s entire database was infeasible in light of the tremendous volume of material accumulated. Accordingly, the court ordered the parties to propose a sampling protocol to obtain examples of claims files in which issues similar to those presented in the case were addressed. In order to facilitate that process, the court further ordered that counsel could take the depositions of persons familiar with defendant’s data storage system. Finally, the court ordered that, to the extent that defendant objected to any sampling proposal advanced by Zurich, it would be required to support its objections with specific evidence of the cost and burden involved.

Regulator Says Morgan Stanley Withheld E-Mail in Cases

From the New York Times:

By GRETCHEN MORGENSON
Published: December 20, 2006

"The NASD, the nation’s largest self-regulatory organization for the securities industry, accused Morgan Stanley yesterday of routinely failing to provide e-mail messages to aggrieved customers who had filed arbitration cases against the firm over three and a half years and with making false claims that millions of e-mail messages in its possession had been lost in the Sept. 11 attack on the World Trade Center.

The regulator also contended in its complaint against Morgan Stanley that the firm regularly destroyed millions of e-mail messages by overwriting its backup tapes and by allowing employees to delete messages. Securities and Exchange Commission rules require that firms keep all e-mails and business communications for three years. "

Continue reading here.

Partners Vote to Create “K&L Gates”

Kirkpatrick & Lockhart Nicholson Graham LLP and Preston Gates & Ellis LLP Announce Combination Effective January 1, 2007

NEW YORK AND SEATTLE — Kirkpatrick & Lockhart Nicholson Graham LLP (K&LNG) and Preston Gates & Ellis LLP (PG&E) today announced that their partners have voted overwhelmingly in favor of a proposed combination of the two firms effective January 1, 2007. The name of the combined firm will be Kirkpatrick & Lockhart Preston Gates Ellis LLP, and the firm will be branded as "K&L Gates." K&L Gates will comprise approximately 1,400 lawyers and 21 offices located in North America, Europe and Asia. The combination will rank as one of the most substantial in the history of the legal profession, and it will create one of the world’s largest law firms. The firm will be expected to have revenue exceeding US$750 Million in 2007, its first full year of existence.

Click here to view the press release.

BREAKING NEWS: U.S. Deputy Attorney General Paul J. Mcnulty Revises Charging Guidelines for Prosecuting Corporate Fraud

From the U.S. DOJ website: U.S. Deputy Attorney General Paul J. McNulty announced today during a speech at a meeting of the Lawyers for Civil Justice in New York that the Department of Justice is revising its corporate charging guidelines for federal prosecutors throughout the country.

The new guidance revises the Thompson Memorandum, which was issued in January 2003 by then-Deputy Attorney General Larry D. Thompson and titled the “Principles of Federal Prosecution of Business Organizations.” The memo provides useful guidance to prosecutors in the field through nine factors to use when deciding whether to charge a corporation with criminal offenses.
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Court Sets Hearing for Plaintiff to Show Cause Why Complaint Should Not Be Dismissed With Prejudice as Sanction for Discovery Misconduct

Exact Software N. Am., Inc. v. Infocon, Inc., 2006 WL 3499992 (N.D. Ohio Dec. 5, 2006)

In this decision, the court concluded that plaintiff’s “persistent and egregious noncompliance with a series of discovery orders” fully warranted severe sanctions, including dismissal of its complaint and entry of default on defendant’s counterclaims. Among other failings, the court noted that plaintiff’s search for documents from its document storage and retrieval system was largely unproductive, and that plaintiff’s counsel had attributed the lack of success to defects in the keywords provided by defendant. The court rejected this attempt to shift blame:
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Dawson Quoted in Widely Carried AP Article

The Associated Press recently turned to partner Martha Dawson as a source on new electronic discovery rules. The article, “Companies Face New Rules on Keeping Data,” appeared in national publications from The New York Times and The Wall Street Journal to other regional and online publications.

The new rules require that lawyers meet much earlier in the discovery process to discuss where the client’s data is stored and how accessible it is. This provision emphasizes the importance of being prepared ahead of time. Writes the AP reporter:

But Martha Dawson, a partner at the Seattle-based law firm of Preston Gates & Ellis LLP who specializes in electronic discovery, said companies will not have to alter how they retain their electronic documents. Rather, she said, they will have to do an “inventory of their IT system” in order to know better where the documents are. The new rules also provide better guidance on how electronic evidence is to be handled in federal litigation, including guidelines on how companies can seek exemptions from providing data that isn’t “reasonably accessible,” she said. This could actually reduce the burden of electronic discovery, she said.

Parties Agree That Responsive ESI To Be Collected From Defendant’s Active IT Environment, And Not From Backup Tapes

In re Celexa and Lexapro Prods. Liab. Litig., 2006 WL 3497757 (E.D. Mo. Nov. 13, 2006)

This constitutes the parties’ agreed order and statement as to a document management plan in this multi-district litigation concerning two prescription drugs. Among other things, the parties agreed that plaintiffs would preserve the hard drives of computers used by plaintiffs and plaintiffs’ decedents, and that such hard drives would be imaged and analyzed pursuant to an agreed forensic examination protocol. The parties also agreed that responsive electronically stored information (“ESI”) would be collected by defendants from defendants’ active IT environment, and that “absent some exceptional circumstance and a demonstration by plaintiffs of some substantial need, defendants shall not be required to restore any backup tapes (specifically including but not limited to the 35 back-up tapes defendants made on April 29, 2005, specifically for purposes of this litigation).” The parties agreed that defendants would preserve the 35 backup tapes, but that they may otherwise resume the recycling of backup tapes.

Plaintiffs also agreed to defer to defendants as to the format of production, and specifically agreed to take ESI produced by defendants in any format that generally is searchable and manageable, including in native file format or as single page TIFF images with associated metadata.

The parties were unable to reach agreement on three subject areas, and those matters would be subject to further briefing and argument. Those disputed topics include: (1) how the cost of the discovery plaintiffs seek from defendants should be apportioned; (2) the scope of discovery relating to the production of entire electronic databases; and (3) whether plaintiffs should be allowed to perform their own forensic examination of plaintiffs’ computer hard drives, or whether an independent forensic consultant should perform the analysis.

Court Enters Stipulated Electronic Discovery Plan and Order to Preserve Evidence

Palgut v. City of Colo. Springs, 2006 WL 3483442 (D. Colo. Nov. 29, 2006)

This order constitutes the parties’ stipulated Electronic Discovery Plan and Order to Preserve Evidence in this employment discrimination case. It includes definitions of various terms and sets out a number of discovery “protocols,” one of which relates to the format of production. The plan states that, “if requested information is or has been stored or located in native (eg. .doc, .xls, .pst) formats (not .tiff images), any requests for “documents,” or “data” shall be deemed a request for information in native format.” (Emphasis in original). The order then sets out a procedure for objecting to production in native format, which seems to conflate the new Rule 26(b)(2)(B) two-tier discovery provision with the new Rule 34(b) format of production provision:

If either party objects to producing the requested information on the ground that production in that format is not reasonably accessible because of undue burden or cost, prior to asserting an objection, the responding party will inform the requesting party of the format in which it is willing to produce it, the nature and location of the information claimed to not be reasonably accessible, the reason(s) why the requested form of production would impose an undue burden or is unreasonably costly, and afford the requesting party 10 working days (calendar days minus weekends and state or federal holidays) from receipt of such notice to propose an alternative means of compliance with the request, including payment of all or part of the costs of retrieving the information.

The order sets out a similar procedure for objecting to the production of electronic information; it also directs the parties’ computer experts to informally cooperate and discuss procedures or protocols to facilitate identification, retrieval and production of computerized information, prohibits the parties from altering or destroying documents (as that term is defined therein), and directs the parties to meet and confer on the issue of cost allocation.

Nunn Appointed Chairman of Subcommittee to Consider E-Discovery Specific Changes to Washington Court Rules

In its October Meeting, the Washington Bar Association Court Rules and Procedures Committee appointed Preston Gates partner Todd L. Nunn as Chairman of the Electronically Stored Information Discovery Subcommittee. The mandate of the subcommittee is to consider whether amendments to Washington’s Civil Rules are needed to handle the specific challenges of the discovery of electronically stored information.  In his practice, Todd advises clients on electronic discovery matters and discovery response planning as a part of the firm’s Document Analysis Technology Group.

Court Awards Full Costs of $20,472, Since Computer Forensics Experts Were “Particularly Necessary to Uncover Plaintiff’s Skulduggery”

Plasse v. Tyco Elecs. Corp., 2006 WL 3445610 (D. Mass. Nov. 8, 2006)

This decision follows the court’s earlier order on sanctions, summarized here, in which the court dismissed the complaint with prejudice and invited the defendant to file an application for attorneys’ fees. Defendant sought $79,524.07 in attorney’s fees and costs in the amount of $20,472.32. The court noted there was ample justification for a fee award in the record, since the evidence showed that the plaintiff “not only altered and destroyed evidence to prevent relevant discovery by Defendant, but continued to modify and destroy evidence even after the court itself had made it clear that the evidence constituted an appropriate area of inquiry for Defendant.” It reduced the attorney fee amount but awarded full costs, stating:

Given Plaintiff’s egregious conduct, an award of fees and costs is only fair. Given the record of this case, however, a fee award of nearly $80,000 would be excessive. The record of the case, as Plaintiff points out, evidences some degree of duplication and overkill. Based on this, the court will award attorney’s fees in the amount of $35,000.00. The court will award Defendant its full costs, since retention of experts was particularly necessary to uncover Plaintiff’s skulduggery.

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