Forensic Update

Reflections on information management within the legal and regulatory arena

Archive for the ‘Litigation Hold’ Category

The (not so) Lost Art of Dropping the Ball…

Posted by Johnny Lee on June 11, 2013

Students of eDiscovery case law (at least in the United States) are quick to identify the motifs that make for good sanctions stories. From Creative Pipe to Qualcomm to a host of others in recent years, one of the stark themes in these cases is the notion of “abuse” of the process.

In a recent case from the Northern District of Ohio, we have these motifs in spades. Indeed, this decision hearkens back to Magistrate Judge Paul Grimm’s insightful synthesis of spoliation law as it relates to electronically stored information in the Victor Stanley, Inc. v. Creative Pipe, Inc. matter.  This current case, however, involves a 2006 suit brought by the United States Equal Employment Opportunity Commission (EEOC) on behalf of Dean Okafor and Hakim Nurridim, who allege that Defendants directed racial slurs at them and that Defendants retaliated for the discrimination charges brought by the EEOC.

In January of 2013, United States District Judge John Adams declared a mistrial after finding that attorneys for one of the parties had removed critical information from trial exhibits. While “redaction” is certainly not a novel concept in American litigation, the inability to explain the reasoning behind such edits tend to be frowned upon in American jurisprudence, and this is what makes this particular sanction example so intriguing.

Judge Adams found that the underlying information that was removed “could clearly alter the entire landscape of these proceedings and the legal theories pursued during trial.” Accordingly, the removal of these data from exhibits, coupled with the inability to articulate any sound reasoning behind the practice, “clearly resulted in substantial prejudice.”

Adams goes on to write that “[in] candor, the Court has strongly considered default judgment in this matter,” citing “a lingering question over how much evidence may never be produced due to either Defendants’ negligence or malfeasance.” Indeed, the only reason for withholding this particular sanction (of default judgment) is that it would provide “a windfall for some if it were granted in total.” Instead, the Court found that an award of attorney fees will serve as a “proper sanction,” thereby making Plaintiffs “somewhat whole for all of the time that was essentially wasted in conducting discovery and trying this matter without all the facts that should have been made known to them.”

The defense offered by the Defendants for this finding of “negligence or malfeasance” for eDiscovery practices?  Electronic Discovery is a lengthy, cumbersome, and complex process involving the identification and sharing of thousands and thousands of documents. Thus, excluding a few select documents from this “herculean” effort should be excused as mere oversight.

The court disagreed, stating that despite “ongoing litigation, Defendants had apparently made no efforts to segregate the items that were properly responsive to discovery. This fact could also conceivably explain why Defendants’ in-trial production resulted in numerous documents being produced that had never been previously produced in more than six years of litigation.” The court went on to say that “simple neglect would be the kindest interpretation available for Defendants’ conduct. In reality, in less than 24 hours following the Court’s demand to produce documents, Defendants were suddenly able to locate and produce documents directly responsive to years-old discovery requests. The Court must now determine what sanction, if any, in addition to a mistrial, is appropriate in this matter.”

The sanctions additional to mistrial took the form of over $300,000 in attorneys fees.  Judge Adams also ordered further discovery (with costs to be borne by Defendants). The full opinion was filed on May 22, 2013 and can be found here.

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Regulator Fines Financial Services Company $9 Million for Email Spoliation…

Posted by Johnny Lee on May 28, 2013

FINRAThe Financial Industry Regulatory Authority (“FINRA”) announced last week that it had levied fines against LPL Financial LLC (“LPL”) to the tune of $7.5 million for thirty five “separate, significant email system failures, which prevented LPL from accessing hundreds of millions of emails and reviewing tens of millions of other emails.”  FINRA also determined that LPL had made “material misstatements” during FINRA’s inquiry into the email failures, resulting in the establishment of a $1.5 million fund “to compensate brokerage customer claimants potentially affected by its failure to produce email.”

While this is technically not a spoliation sanction, which can only be issued by a court, it is nonetheless what those in the eDiscovery arena recognize as punishment for the failure to preserve relevant evidence.  FINRA’s Chief of Enforcement said that LPL simply failed to “expand its compliance and technology infrastructure” as LPL grew.  This resulted in LPL failing “in its responsibility to provide complete responses to regulatory and other requests for emails.”

To be clear, FINRA felt that these failures were both systemic and severe.  To illustrate just a few of the thirty five enumerated failures, see just a few examples below.

  • LPL failed to supervise 28 million “doing business as” (DBA) emails sent/received by thousands of representatives who were operating as independent contractors over a four-year period.
  • LPL failed to maintain access to hundreds of millions of emails during a transition to a less expensive email archive (with 80 million of those emails becoming corrupted in the process).
  • For seven years, LPL failed to preserve and review 3.5 million Bloomberg messages, as required by regulation.
  • LPL failed to preserve emails sent to customers via third-party email-based advertising platforms.

The Chief of Enforcement sums this up in a rather pithy statement: “This case sends a strong message to firms to make sure your business does not outgrow your compliance systems.”  Indeed…message received.

For more on FINRA’s consent announcement, please click here. To read the actual consent agreement, please click here.

Please see the disclaimer associated with content published on (and associated with) this site.

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Upcoming AIIM Webinar on Information Governance…

Posted by Johnny Lee on September 2, 2012

ForensicUpdate editor will lead a presentation in late September on “Information Governance in our Social World.”  The webinar will be hosted by Autonomy and produced by AIIM.

The description for the webinar is as follows: “Information Governance is concerned with defining accountability for an organization’s information assets. If governance is implemented properly – that is, if there is GOOD governance – the organization’s information management should be compliant with any relevant legislation or regulations.

In addition to good governance, organizations need to be consistent with their departmental policies – the kinds of policies that are often sporadically enforced and/or are contradictory from one department to the next (i.e., HR or accounting retention or security policies that differ from IT’s practices).

Join this webinar to learn the latest on how Information Governance will address all the multi repository and social media interfaces that impact your organization’s policies — including those that attempt to govern behavior within your organization as well as those that affect your customers and other partners and providers. Learn tips on how to improve your information governance programs for better compliance, better processes, and better information management.”

Please see the disclaimer associated with content published on (and associated with) this site.


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ForensicUpdate Editor to join panel on “Information Security, Access Control and Forensics”…

Posted by Johnny Lee on August 8, 2012

The Metro Atlanta Chapter of the Information Systems Security Association (ISSA)® will host a panel discussion on information security and related topics in late August 2012.  The meeting will be held on August 30, 2012 from 6:30 PM – 9:00 PM at One Concourse Pkwy NE, 5th floor, Atlanta, GA 30328.  Panelists include Andre Maxwell (Principal at Information Security Xperts, Inc.), Kevin Morgan (Global IT Audit Manager at InterContinental Hotels Group), and Johnny Lee (Forensic Investigator and ForensicUpdate editor).


Please join us for a lively discussion of trends, technologies, and lessons learned from practitioners wrestling with these issues on a daily basis.  Audience participation is both welcome and encouraged.  We hope to see you there!  Click here for details.

“The ISSA is a not-for-profit, international organization of information security professionals and practitioners. It provides educational forums, publications, and peer interaction opportunities that enhance the knowledge, skill, and professional growth of its members.  The primary goal of the ISSA is to promote management practices that will ensure the confidentiality, integrity, and availability of information resources. The ISSA facilitates interaction and education to create a more successful environment for global information systems security and for the professionals involved. Members include practitioners at all levels of the security field in a broad range of industries such as communications, education, healthcare, manufacturing, financial, and government.”

Please see the disclaimer associated with content published on this site.

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The Poisoned Well: Dreaded Pre-Trial “adverse inference” Jury Instruction in Apple v. Samsung

Posted by Johnny Lee on July 26, 2012

U.S. Magistrate Judge Paul S. Grewal granted plaintiff’s motion to issue a critical jury instruction related to the trial between tech giants Apple and Samsung…before the trial is even underway.  This ruling allows the jury to draw whatever inferences it wishes about the “lost evidence,” with Judge Grewal stating that the lost evidence was not only favorable to the plaintiff (Apple) but that the jury “…may choose to find it determinative, somewhat determinative, or not at all determinative in reaching your verdict.”

This ruling puts the defense team (Samsung) even more on the defensive in a suit meant to settle a host of substantial Intellectual Property and device design disputes.  Judge Grewal grounded his jury instruction upon the evidence submitted that the defendant had failed to avoid the auto-deletion of key email evidence.

Judge Grewal summarized the defendant’s lapse as a failure to recognize when its evidence-preservation duties arose (in Judge Grewal’s words, “especially during the critical seven months after a reasonable party in the same circumstances would have reasonably foreseen this suit”).  Simply put, the defendant “fell short of what it needed to do.”

This will be a much-watched case, and having the well “poisoned” so early in the case may have a profound effect upon the outcome.  Undoubtedly, this case will  be discussed a great deal in the eDiscovery literature as yet another object lesson on the importance of evidence preservation, including the related corollaries of records retention, data governance, and litigation holds.

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Must Transactional Attorneys Preserve Evidence?

Posted by Johnny Lee on June 5, 2012

Shred-DocumentIt is almost axiomatic in American jurisprudence that the duty to preserve arises for a party when that party “knows or reasonably should know” that litigation is foreseeable.  That said, a recent matter out of the federal courts in New York has raised a very interesting question about evidence preservation duties, as well as when and how they extend to certain parties — including their counsel.

Corporate and litigation counsel alike recognize their (somewhat nebulous) triggering event as the “reasonable anticipation” of a dispute arising, and they respond by issuing data preservation instructions to custodians to ensure that all potentially relevant information is retained for possible review and use in such a matter.  However, federal magistrate judge Joan Azrack has indicated that counsel for a party that destroys evidence might be sanctioned for failing to preserve — independent of a litigation hold — certain documents (including emails) that relate to “the lawyer’s negotiation and documentation of a loan agreement.”

What’s novel in this matter is not that this duty arises for counsel, but when and why.  The case (FDIC v. Malik) involves a suit brought by the FDIC, in its role as the receiver for a mortgage company, against the mortgage company’s attorneys (et alia) relating to a series of loan transactions.

It is important to note that this case is still in process, so its implications (both for litigation- and for records-management) will be watched closely.  Of particular note here is the implication that document retention regulations (in this case, arising out of the attorney’s professional responsibility rules) can establish evidence-preservation obligations where the affected party is “a member of the general class of persons that the regulatory agency sought to protect in promulgating the rule.”  If we were to extrapolate this to organizations across the legal spectrum, this could represent a precedent of staggering influence to corporate America and the way it manages information.


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Federal Circuit’s Model Order adopted to curtail the expense of eDiscovery…Paradigm Shift of Wishful Thinking?

Posted by Johnny Lee on January 30, 2012

eDiscovery-LassoIn a move designed to stem the escalating costs of electronic discovery, the U.S. Court of Appeals for the Federal Circuit recently adopted a Model Order that sets out requirements designed to limit the scope and impact of eDiscovery in patent cases.  In a September 2011 presentation, Chief Judge Randall Rader of the U.S. Court of Appeals for the Federal Circuit unveiled a Model Order Regarding E-Discovery in Patent Cases (“Model Order”).

Judge Rader stated last September (at the joint conference of the Federal Circuit and Eastern District of Texas) that the Model Order will serve as an aid to district courts to enforce “responsible, targeted use of eDiscovery.”  According to Chief Judge Rader, the Model Order was drafted by special committee of the Advisory Council for the Federal Circuit and was designed to achieve the efficiencies achieved via Federal Rule of Civil Procedure (“FRCP”) Rule 30 (which limits the number of depositions that may be taken by each party).

The Model Order contains discrete provisions orchestrated to minimize expensive, overbroad, and time-consuming eDiscovery requests by establishing a process by which parties should exchange information, including electronically stored information (“ESI”).  Under the Model Order, parties are required to exchange “core documentation” prior to any request or production of electronic mail.  This core documentation includes related to the underlying patent and it prior art as well as the allegedly infringing product.

One of the most impactful provisions of the Model Order is its distinct and very detailed — treatment of electronic mail.  The Model Order actually presumes that general production requests shall not include email.  This addresses one of the most significant aspects of discovery in patent litigation, as a good deal of what is typically reviewed in such matters begins (and often ends) with a review of email.

Should this presumption be surmounted in a given matter, the Model Order also seeks to limit the number of custodians from whom email shall be produced.  “Each requesting party shall limit its email production requests to a total of five custodians per producing party for all such requests.”  This too can have a tremendous impact on the scope, expense, and timeliness of document reviews within patent litigation.

These changes alone are substantial, but the Model Order goes on to limit the nature and scope of eDiscovery in several other notable ways:

  • Email production requests should be limited to a total of five search terms, per custodian, per party;
  • Absent a showing of good cause, parties should be exempted from producing metadata;
  • Costs will be shifted for disproportionate production requests (consistent with FRCP Rule 26); and
  • Inadvertent productions are deemed a non-waiver within the pending case or any other state/federal proceeding (consistent with Federal Rule of Evidence 502).

These changes codify a material shift in thinking that speaks directly to the root causes of overblown eDiscovery efforts in patent cases.  Moreover, these changes should begin to bear fruit immediately in the form of reduced “digital haystacks” that parties are required to sift through in search of the proverbial needle(s) they seek.

Indeed, in a recent patent case in the Northern District of California, a U.S. Magistrate Judge granted a defense motion to govern discovery using an order quite similar to the Model Order (q.v., DCG v. Checkpoint Technologies).  Interestingly, in that case, the plaintiff asserted that the Model Order should not be applied, as it was designed to limit discovery abuses by so-called “patent trolls” (as opposed to disputes between actual competitors in the marketplace).  The Magistrate Judge disagreed with this assertion, stating that the Model Order neither deals exclusively with patent trolls nor exempts parties from discovery scope-limitations simply because they are market competitors.

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General Counsel Toolworks Forum: Data Governance & eDiscovery

Posted by Johnny Lee on December 1, 2011

Sponsored by Grant Thornton LLP’s Forensic & Litigation professionals, the Forum offers educational events and resources for today’s in-house counsel and corporate senior management. We collaborate with trial and transaction lawyers from some the nation’s leading law firms to bring you periodic complimentary webcasts addressing important financial, operational and legal issues that can impact your organization.

Each event will be supported by a customized Toolbox — documents and other resources offering guidance on the topics covered by the webcast.  The next Toolworks Forum will focus upon the state of the e-discovery marketplace; the importance of intelligent, proactive information and litigation management; and practical steps companies can take to reduce expenses and risks associated with civil litigation and government investigations.

This webinar event will be held on Thursday, January 19, 2012, and it will begin at 1:00pm Eastern time and continue for 90 minutes.  CLE credit has been applied for, and full details can be found here.  Johnny Lee, Director in Grant Thornton’s Forensic & Litigation practice, and Dante Stella, eDiscovery practice leader at Dykema Gossett, will present.

Posted in Computer Forensics, Data Governance, ECM, eDiscovery, Information Security, Investigations, Litigation Hold, Records Retention, Social Networking | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment »

“Controlling your Data Avalanche” Webinar…

Posted by Johnny Lee on October 27, 2011


I am pleased to announce that I will join luminaries from Vedder Price, a prominent U.S. law firm, in a discussion on “Managing your Data Avalanche” on November 16, 2011.  This webinar will delve into strategies for satisfying an organization’s legal obligations associated with Records Retention, eDiscovery, Litigation Holds, and Data Privacy.

“All too often, companies approach their data management obligations reactively and in a piecemeal fashion. This need not be the case; in fact, companies can satisfy their legal obligations with greater certainty — and more economically — through comprehensive data management strategies.”

This Webinar will be of interest to General Counsel, Chief Compliance and Information Officers, and those with a key role in managing eDiscovery or litigation within an organization.  This Webinar will provide an overview of legal trends in data management, with a specific focus on social media, cloud computing, eDiscovery, litigation holds, and data breach preparedness and response.  We will discuss ways in which companies can better manage their data through proactive data-management strategies.

To register for this webinar, please click here.  (Login information and presentation materials will be sent to registrants prior to the webinar.)

Click to learn more about Grant Thornton’s Forensics, Investigations and Litigation practice.   Click to learn more about Vedder Price’s Records Management, eDiscovery and Data Privacy practice.

Posted in Announcement, Computer Forensics, Data Governance, ECM, eDiscovery, Forensic Accounting, Information Security, Investigations, Litigation Hold, Privacy, Records Retention, Social Networking | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Comments Off on “Controlling your Data Avalanche” Webinar…

Excellent Session with the IT GRC experts at annual ISACA Conference…

Posted by Johnny Lee on October 26, 2011

ISACA_ITGRC-LogoLast week, I had the pleasure of presenting to a lively audience at the world’s leading conference for IT governance, risk and compliance professionals. The event, hosted at the Ritz-Carlton Hotel in Orlando by the good folks at ISACA, brought together a panoply of experts in the auditing, compliance, privacy, and information security space.

I presented on the subject of Data Governance and Electronic Discovery, and how these concepts represent “flip sides of the same coin.” What was particularly rewarding for me was the level of interest and participation during our interactive case study. Thanks to all who attended and participated last week…I enjoyed myself immensely, and I hope that you found it a rewarding discussion.

Posted in Computer Forensics, Data Governance, ECM, eDiscovery, Fraud, Information Security, Investigations, Litigation Hold, Privacy, Records Retention, Social Networking | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | Comments Off on Excellent Session with the IT GRC experts at annual ISACA Conference…

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