Archive: April 2009

1
Centaurus Financial Fined $175,000 for Failing to Protect Confidential Customer Information
2
Qualcomm Agrees To Pay Broadcom $891 Million as Part of Settlement Agreement
3
Acknowledging Trial Court’s Efforts to Fashion an Appropriate Sanction, Appellate Court Rejects Argument that Sanction was Punitive and Affirms Award of $90,000
4
Keeping You Informed: K&L Gates Partners to Speak at Upcoming Events
5
Finding Question of Duty to Preserve Backup Tapes Hinges on Applicability of Exception to the Rule, Court Orders Hearing to Address the Issue
6
Court Finds Party’s Discovery Performance “Clearly Egregious” but Undeserving of Harshest Sanctions, Orders Additional Discovery and Forensic Examination of Backup Systems to Verify Completeness of Production
7
Reliance on Employees’ Judgment in Document Retention Policy Results in Finding of Culpability for Spoliation where Documents were Not Preserved
8
Court Denies Criminal Defendant Access to Image of Police Hard Drive Absent Showing of Falsification or Adulteration of Transcripts of Chats Produced by the State
9
Timing is Everything: Court Declines to Impose Spoliation Sanctions where Critical Evidence was Destroyed Before Duty to Preserve Arose

Centaurus Financial Fined $175,000 for Failing to Protect Confidential Customer Information

The Financial Industry Regulatory Authority (FINRA) announced this week that it has fined Centaurus Financial, Inc. $175,000 for failing to protect confidential customer information.  Specifically, between August 2006 and July 2007 Centaurus failed to employ adequate safeguards against infiltration of its fax server containing the information at issue.  Examples of the inadequate protection measures include the use of a “weak” username, “Administrator,” and the password “password.”  The company’s safety failures resulted in unknown persons conducting a “phishing” scam hosted by Centaurus’s fax server.  Additionally, Centaurus’s notification to customers regarding the breach in security was found to have been misleading.

To read the full text of FINRA’s press release regarding this decision, click here.
 

Qualcomm Agrees To Pay Broadcom $891 Million as Part of Settlement Agreement

Announced this week, Broadcom Corporation and Qualcomm Incorporated have entered into a settlement and multi-year patent agreement.  Under the terms of the settlement agreement, Qualcomm has agreed to pay Broadcom $891 million over four years.  Other notable terms of the agreement include dismissal of all litigation between the companies and Broadcom’s withdrawal of its complaints to the European Commission and the Korea Fair Trade Commission.  According to Qualcomm’s press release, the parties have also agreed to grant one another certain rights under their respective patent portfolios.

To read the full text of Qualcomm’s recent press release, Click Here.
 

Acknowledging Trial Court’s Efforts to Fashion an Appropriate Sanction, Appellate Court Rejects Argument that Sanction was Punitive and Affirms Award of $90,000

Oz Optics, Ltd. v. Hakimoglu, 2009 WL 1017042 (Cal. App. Apr. 15, 2009) (Unpublished)

In this case arising from defendant/appellant Hakimoglu’s breach of her employment contract, the trial court awarded $90,000 in monetary sanctions upon finding that Hakimoglu violated a court order to produce her laptop and spoliated evidence by using wiping software to delete potentially relevant data.  Upon appeal of this issue, among others, the appellate court affirmed.

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Keeping You Informed: K&L Gates Partners to Speak at Upcoming Events

IQPC 7th Annual e-Discovery Conference

April 27-29, 2009
Le Meridien San Francisco
333 Battery Street
San Francisco, CA 94111

K&L Gates partner David Cohen will be a part of the panel leading the discussion at Workshop C entitled, “E-discovery In a Down Economy: Achieving Litigation Readiness While Cutting Costs & Improving Outcomes” scheduled to take place on April 27th at 2:45 PM.  The discussion will address a myriad of topics including readiness through proper records management, the effect of the recent economic downturn, and best practices to reduce costs, among other things.

Click Here to register.

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Finding Question of Duty to Preserve Backup Tapes Hinges on Applicability of Exception to the Rule, Court Orders Hearing to Address the Issue

Forest Labs., Inc. v. Caraco Pharm. Labs., Ltd., 2009 WL 998402 (E.D. Mich. Apr. 14, 2009)

In this case, defendants filed a motion seeking a hearing to address plaintiffs’ suspected spoliation of evidence, for an order forbidding plaintiffs from asserting that their drug, escitalopram, did produce unexpected results, and for plaintiffs to pay attorney fees.  Defendants’ motion alleged plaintiffs had destroyed or rendered unsearchable “key electronic records” tending to show that the drug did not produce unexpected results.  Plaintiffs denied the allegation arguing they had preserved all emails on their active file server and had continued their standard operating procedures in good faith.  Finding that inaccessible information stored on plaintiffs’ disaster recovery back up tapes had been destroyed after the duty to preserve arose, the court held that a hearing was necessary to determine whether that information was subject to an exception that would have required the tapes to be preserved.

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Court Finds Party’s Discovery Performance “Clearly Egregious” but Undeserving of Harshest Sanctions, Orders Additional Discovery and Forensic Examination of Backup Systems to Verify Completeness of Production

Preferred Care Partners Holding Corp. v. Humana, Inc., 2009 WL 982460 (S.D. Fla. Apr. 9, 2009)

Following defendant’s discovery of thousands of relevant documents two months after the close of discovery and one month before trial, defendant ordered its employees to print the information and then to delete that information from their computers.  Defendant argued the information was deleted in furtherance of its obligations under a Confidentiality Agreement requiring the destruction of the information discovered and that printing the information fulfilled its preservation obligations related to litigation.  Finding that sanctions were warranted, the court ordered additional discovery into issues revealed by the newly discovered evidence at defendant’s expense and for defendant to allow plaintiffs to conduct a forensic examination of defendant’s backup system to verify its maintenance of deleted emails and to verify that all relevant emails were produced despite defendant’s directive to its employees to print and delete.

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Reliance on Employees’ Judgment in Document Retention Policy Results in Finding of Culpability for Spoliation where Documents were Not Preserved

Phillip M. Adams & Assoc., LLC v. Dell, Inc., 621 F. Supp. 2d 1173 (D. Utah 2009)

In this patent infringement case, plaintiff, Phillip M. Adams & Associates (“Adams”), alleged that defendants ASUSTEK Computer Inc. and ASUS Computer International (collectively “ASUS”) spoliated relevant evidence and should therefore be sanctioned.  Finding that ASUS violated its duty to preserve and that the loss of evidence could not be excused as a “routine, good faith operation of electronic information systems,” the court ruled that sanctions were appropriate, but reserved imposition pending the close of discovery and a determination of prejudice.

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Court Denies Criminal Defendant Access to Image of Police Hard Drive Absent Showing of Falsification or Adulteration of Transcripts of Chats Produced by the State

State v. Rivas, 121 Ohio St. 3d 469, 905 N.E.2d 618 (Ohio 2009)

In this case, the Supreme Court of Ohio was asked to address the question of whether “in a case in which a prosecutor has complied with its duty to provide discovery by delivering a transcript of evidence from the hard drive of a police computer, the accused has the right to obtain a mirror image of the computer hard drive without making a prima facie showing that the information in the transcript is false, incomplete, adulterated, or spoliated.”  The court concluded that without making such a showing, a defendant has no right to obtain a copy of the hard drive.

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Timing is Everything: Court Declines to Impose Spoliation Sanctions where Critical Evidence was Destroyed Before Duty to Preserve Arose

U.S. v. Maxxam, Inc., 2009 WL 817264 (N.D. Cal. Mar. 27, 2009)

In this case, which arose from the joint purchase of the Headwaters Forest by the United States Government and the State of California, plaintiffs moved for sanctions due to the alleged spoliation of “critical” evidence by defendants Maxxam and Hurwitz.  Despite finding that “certain evidence was not preserved,” the court declined to impose spoliation sanctions where there was no evidence that the destruction was intentional and where, at the time of the destruction, there was no duty to preserve.

In the 1990’s, the U.S. Government and the State of California agreed to purchase the Headwaters Forest from Pacific Lumber, which had recently been taken over by defendant Maxxam, Inc., a company controlled by defendant Hurwitz.  As a condition of purchase, Pacific Lumber agreed to develop and implement a sustained yield plan (“SYP”) for its retained properties, subject to approval.  An SYP was prepared by Pacific Lumber’s consulting company, VESTRA, using computer modeling and was eventually approved.  Later, plaintiffs determined that the SYP was fraudulent in many respects and a lawsuit was filed in December 2006.

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