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Entries tagged with "business litigation" |
| | Arbitrators Cannot be Disqualified Based on Voluntary Disclosures | In a case of first impression, the California Court of Appeal has rejected an attempt to disqualify an arbitrator after the arbitrator volunteered information that was not required to be disclosed under the rules and statutes governing arbitration. In Luce, Forward, Hamilton & Scripps, LLP v. Koch, 2008 WL 1886606 (Cal. App. 2008), the Court of Appeal, Fourth Appellate District, held that the arbitrator could not be disqualified based on information he voluntarily disclosed orally during the proceedings.
Luce Forward filed a breach of contract suit against four former clients who had retained the firm to represent them in a complex securities litigation. Other than their initial retainer, the former clients did not pay Luce Forward any fees, and after filing suit, Luce Forward successfully compelled arbitration under the fee agreements, which contained an arbitration clause. Judge J. Richard Haden, a retired Superior Court judge with the Judicial Arbitration and Medication Services (“JAMS”) was selected as the arbitrator. As required by the rules, the Judge Haden sent the parties a written disclosure indicating that he had served as mediator in three cases in which Luce Forward was a party and attorneys at the firm participated as counsel in those mediations. The judge indicated that the mediations did not concern issues arising in this case and stated that he did not believe that his prior work would impact his ability to be fair. None of the parties challenged the disclosure.
After the arbitration commenced, the judge stated that after reviewing the witness list and the pleadings the weekend before the arbitration, he discovered that he had served on the board of a local trial lawyers’ association with one of the witnesses and one of the firm’s lawyers. Koch then requested that the judge disqualify himself, but the judge denied that challenge. Ultimately, the judge issued an award in favor of the law firm, and the award was confirmed by the superior court.
The Court of Appeal rejected Koch’s contention that Judge Haden was required to disqualify himself based on the disclosures made during the arbitration. According to the court, “Judge Haden was not legally required to make any disclosures pertaining to” the witness of the attorney where “there was no indication Judge Haden had a personal relationship, or close friendship” with either of them. There was no evidence of a business relationship, and serving on a volunteer board or participating in the same professional organizations did not create one. Generally, no disclosure is required when there has been slight or attenuated contact because “arbitrators cannot sever all their ties with the business world” or the legal community. The court noted that “under the defendants’ theory, an arbitrator could be disqualified during arbitration for orally revealing even the most attenuated contact with a party’s counsel or witness, such as occasionally shopping at the same grocery store.”
Because Judge Haden was not required to make the disclosures, he also was not obligated to disqualify himself after voluntarily disclosing the relationships. The judge complied with the disclosure obligations under the statutes, and an arbitrator may only be disqualified “when the disclosure is legally required.”
Full Opinion Text: http://www.courtinfo.ca.gov/opinions/documents/D049788.PDF
|  | Tags: appellate Law arbitration business litigation | | |
| | Texas Workforce Commission Decisions Have Res Judicata Effect |  Texas employers should review a recent decision by the Texas Supreme Court that will affect the resolution of wage claims made under the Texas Payday law. In a case of first impression, the Texas Supreme Court has held that a final adjudication of a wage claim by the Texas Workforce Commission denying the claim precludes the subsequent filing of a common law wage claim in state court. The decision in Igal v. Brightstar Information Technology Group, Inc., 2007 WL 4276545 (Tex. 2007), emphasizes for all companies with employees in Texas the importance of responding forcefully to wage claims made to the TWC, as a victory in that forum will not prevent an employee from later pursuing the same claim in court.
Igal was terminated by Brightstar and contended that under his employment agreement, he was entitled to a post-termination salary. In 1989, the Texas Legislature amended the Texas Payday Law to provide for an administrative procedure under which a claimant could file a wage claim with the TWC. Accordingly, Igal filed a claim with the TWC, asserting a violation of his employment agreement and claiming unpaid wages. The TWC concluded that Igal’s claims failed on the merits and that it lacked jurisdiction because Igal filed his claim more than 180 days after his wages became due for payment. Instead of filing a motion for rehearing or seeking judicial review of the TWC’s decision, Igal sued Brightstar in a Texas state court for breach of contract and declaratory judgment. The trial court granted summary judgment for Brightstar, holding that res judicata barred Igal’s claims, and the Court of Appeals affirmed.
The Supreme Court agreed, concluding that “res judicata attaches to TWC’s final administrative decision.” Res judicata bars the relitigation of claims that have been finally adjudicated on the merits in a prior action. The court concluded that res judicata does apply to claims previously determined by an administrative agency. In deciding wage claims, “TWC acts in a judicial capacity.” Because the parties “had an adequate opportunity to litigate their claims through an adversarial process in which TWC finally decided disputed issues of fact,” res judicata applied.
The court rejected Igal’s contention that the TWC procedure was only intended to be an alternative, and not an exclusive, remedy. According to the court, agencies and courts may both “provide remedies for injuries actionable under the common law.” The Payday Law was intended to provide an alternate remedy to employees when it would be too difficult to pursue a traditional lawsuit. When an employee chooses this alternative, that employee cannot later relitigate the same claims in a court. The holding in Igal will therefore prevent employees who are unsuccessful in a TWC proceeding from pursuing the same claims against their employers in a Texas court.
Full Opinion Text: http://www.supreme.courts.state.tx.us/historical/2007/dec/040931.pdf | | Tags: appellate Law business litigation | | |
| | No “Famous” or “Well-Known” Marks Doctrine in New York | The New York Court of Appeals has rejected the application of the “famous” or “well known” marks doctrine under New York law. Companies concerned about infringement of unregistered marks in New York state should be aware that claiming their mark is “famous” or “well-known” will not be sufficient to state a common law claim for unfair competition when a competitor uses the mark in New York. Instead, a business will have to demonstrate that in New York, there is actual good will attached to the name by New York residents.
ITC operates a five-star restaurant named Bukhara in New Delhi, India. According to the court, the restaurant “has attained some measure of renown among those with an avid interest in fine cuisine” and has been named as one of the 50 best restaurants in the world. ITC, however, has had little luck in capitalizing on the restaurant’s prestige. While it opened or franchised restaurants under the Bukhara name, most of those restaurants, including ones in the United States, have closed. ITC obtained a U.S. trademark in 1987 but has not operated a restaurant in the U.S. since 1997.
In 1999, some former employees of the New Delhi Bukhara restaurant opened the Bukhara Grill in Manhattan and later opened a second location. The Manhattan restaurant features many of the New Delhi restaurant’s signature dishes and replicates much of its décor. ITC filed suit in federal court against the Manhattan restaurant for trademark infringement, unfair competition, and false advertising under federal and New York law. The district court ruled that ITC could not pursue trademark or trade dress infringement claims because it had abandoned its mark and dress. The court also rejected ITC’s contention that it could nevertheless pursue claims under the “well known” or “famous” marks doctrine, a controversial and little-used doctrine that gives common law protection to marks that are famous or well-known. On appeal, the Second Circuit certified two questions to the New York Court of Appeals regarding the famous marks doctrine and the viability of ITC’s unfair competition claim.
In ITC Limited, v. Punchgini, Inc., 2007 WL 4334177 (N.Y. 2007), the Court of Appeals held that ITC could pursue a claim for unfair competition on a theory of misappropriation. Under New York law, a common law unfair competition claim may be based on palming off or misappropriation. New York, however, has not recognized the “famous” or “well-known” marks theory doctrine. The Court of Appeals explicitly stated that it was not recognizing this doctrine or any new theory of liability. Instead, New York recognizes a claim for unfair competition based on the idea that for certain kinds of businesses, goodwill attached to the name of the business has value and the name may not be misappropriated to compete unfairly against a party in New York. The court also recognized that such good will “can, and does, cross state and national boundary lines.”
To pursue a claim based on misappropriation of a famous foreign mark, a plaintiff must demonstrate that it does have goodwill associated with its mark in New York state. “At the very least, a plaintiff’s mark, when used in New York, must call to mind its goodwill. Otherwise, a plaintiff’s property right or commercial advantage based on the goodwill associated with its mark is not appropriated in this state when its unregistered mark is used here.” According to the court, at a minimum, consumers in New York must primarily associate the mark with the foreign plaintiff. In assessing whether such goodwill exists, a court should consider, among other things, public statements or advertising, direct evidence such as surveys, and evidence of actual overlap between customers of the New York defendant and the foreign plaintiff. ITC makes it plain that the fact that a “famous” foreign mark has been copied is not sufficient – the plaintiff must demonstrate that the mark has value in New York before a claim may proceed.
Full Opinion Text: http://www.nycourts.gov/ctapps/decisions/dec07/165opn07.pdf
| | Tags: appellate cases business litigation trademark infringement trademarks | | |
| | Attorney’s Duty When Receiving Inadvertently Disclosed Privileged Documents |  Business and attorneys involved in California litigation may be affected by a recent ruling by the California Supreme Court regarding an attorney’s obligations when receiving inadvertently disclosed information that is protected by the attorney-client privilege or the work product doctrine. In Rico v. Mitsubishi Motors Corp., 2007 WL 4335934 (Cal. 2007), the court ruled that when an attorney inadvertently receives privileged documents in discovery, the attorney “may not read a document any more closely than is necessary to ascertain that it is privileged.” Once that determination is made, the attorney is obligated to notify opposing counsel and try to resolve the situation. To do more than that will invite disqualification.
The issue arose after a Mitsubishi Montero rolled over while being driven on a freeway. Plaintiff, who was injured in the accident, sued Mitsubishi and the California Department of Transportation. Mitsubishi’s representatives met with their lawyers and two designated defense experts to discuss litigation strategies and vulnerabilities. Defendant’s attorney took notes at the meeting and had the notes typed up and printed. The printed copy was not labeled “confidential” or “work product.” A few weeks later, defendants’ attorney deposed one of plaintiff’s expert witnesses. Plaintiff’s counsel was late to the deposition, and while waiting, defendant’s attorney left the room, leaving his briefcase, computer, and case file. According to the court, “somehow,” plaintiff’s attorney acquired the printout of the notes taken by defendant’s attorney during the earlier strategy session. A week after acquiring the notes, plaintiff’s attorney used them in a deposition of a defense expert, asking about the witness’s participation in the strategy session. Mitsubishi then moved to disqualify plaintiff’s counsel.
The Supreme Court agreed with the trial court and the court of appeal that the motion to disqualify was property granted. The court found that the notes, which discussed strategy and trial preparation and reflected counsel’s opinions, were protected as attorney work product. Accordingly, the notes were absolutely protected from disclosure.
The court then addressed an attorney’s duty upon receipt of attorney work product. When privileged documents – either work product or material subject to the attorney-client privilege – are received inadvertently, an attorney “should refrain from examining the materials any more than is essential to ascertain if the materials are privileged, and shall immediately notify the sender that he or she possesses material that appears to be privileged.” The parties may then either resolve the issue themselves or seek guidance from the court. This rule protects the right of an attorney to prepare for trial with the necessary degree of privacy and prevents opposing counsel from taking undue advantage of their adversary’s efforts. In this case, plaintiff’s counsel acknowledged that after reviewing the document for a few moments, he realized it contained work product. The court noted, however, that such an admission is not necessary to apply the rule.
The court also concluded that disqualification was an appropriate remedy. The damage caused by plaintiff’s counsel reading and using the document could not be mitigated. The court determined that plaintiff’s counsel “also acted unethically by making full use of the document.” Plaintiff’s counsel contended that his use of the document was proper because it showed that the experts were not being truthful. The court rejected this argument, making it clear that the contents of the document were entirely irrelevant to enforcing the rule regarding advertent disclosure. “Once the court determines that the writing is absolutely privileged, the inquiry ends. Courts do not make exceptions based on the contents of the writing.” The decision in Rico establishes a bright-line rule for dealing with inadvertent disclosure.
Full Opinion Text: http://www.courtinfo.ca.gov/opinions/documents/S123808.PDF
| | Tags: appellate Law business litigation discovery | | |
| | Effective Use of Local Rules and Rocket Docket Forums Can Reduce Litigation Costs | It is no secret that patent litigation is a costly endeavor. It can price small defendants out of being able to defend themselves on the merits and can likewise be the prohibitive factor when small plaintiffs want to enforce their claims. For the small or mid-sized company, the amount at issue many times simply does not justify the high-cost and high-risk of patent litigation.
The costs of litigation can be managed and decreased using court rules that promote efficient litigation and provide for speedy resolution of disputes. Courts in the Eastern District of Texas are widely recognized as national leaders in patent litigation, in large measure, because they provide a relatively quick system for resolving patent disputes. For the party that employs experienced counsel and a strategy to maximize those attributes, the cost of preparing a patent case can be reduce on both sides. This efficiency is accomplished in various ways, including the use by several judges of special rules for patent cases and those same judges’ continuation of the district's tradition of early, firm trial settings. Experienced counsel can see that speedy trial settings and discovery limitations can be used not only to the benefit of a plaintiff, but to the small defendants’ favor as well when defending commercial patent cases. In fact, the settings provide a way of defending a case on the merits that would otherwise cost too much. A small patent defendant is best off in the Eastern District when it has a defense on the merits because there it may possibly get the cheapest path to a trial setting of anywhere in the nation. The truth is, with a valid case and good lawyering, there is no reason that tremendous advantage cannot be found and a path to more efficient litigation discovered by all parties by using the resources of the Eastern District.
| | Tags: business litigation patent disputes | | |
| | Minimum Resale Price Maintenance to be Evaluated Under the Rule of Reason | Supreme Court Overturns Antitrust Precedent from 1911
On the last day of the Supreme Court’s 2006 term, the Court published its 5-4 decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc.. Leegin raises an important issue related to retail sales agreements and violation of the Sherman Act.
Leegin manufactures products under the brand name Brighton – whose products include handbags, belts, jewelry and other accessories. PSKS owns a boutique that sold the Brighton products at its store. Leegin required its retailers to agree in writing to a minimum resale price for all of their products. (A minimum resale price maintenance (“Minimum RPM”) agreement is an agreement enforced by the manufacturer requiring the retailer to set the resale price at an agreed upon minimum. For example, Brighton would require PSKS to sell a handbag at a minimum price of $250.) PSKS initially agreed, but later sold products at a reduced price in order to compete against other nearby retailers.
Leegin sued in the United States District Court for the Eastern District of Texas and the jury found in favor or PSKS because the court determined that the Minimum RPM agreement was per se illegal under the long-standing precedent of Dr. Miles, decided in 1911. The Fifth Circuit Court of Appeals affirmed. The Supreme Court reversed in a 5-4 decision overruling Dr. Miles, and determining that vertical Minimum RPM’s are to be evaluated under the rule of reason – giving judges greater discretion in determining whether the Sherman Act was violated. The rule of reason requires a court to assess restraints on trade by looking at the impact on competition.
Most commentators and the dissent in Leegin believe that this decision will drive up retail prices and consumers will be paying even higher prices for specialty items because now, manufacturers can enforce vertical Minimum RPM agreements under the threat that the retailer will lose the opportunity to sell their goods if they do not comply with the agreement.
| | Tags: US Supreme Court Cases business litigation federal cases | | |
| | Domain Name Not Tangible Property |  In Palacio del Mar Homeowners Assn., Inc. v. McMahon, — Cal.Rptr.3d —, 2009 WL 1668294 (Cal. App. 4 Dist. June 16, 2009), the court found that a domain name was not tangible personal property capable of being turned over in a judgment recovery action. Palacio obtained a $40,000 judgment against McMahon and Palacio demanded a domain name McMahon allegedly owned in satisfaction of the judgment. A turnover order was sought and issued pursuant to section 708.205 of West’s Annotated California Code of Civil Procedure authorizing the court to order the judgment debtor's interest in the property in the possession or under the control of the judgment debtor to be applied toward the satisfaction of the money judgment.
The court found that the statute does not allow the turnover of the defendant’s domain name to satisfy the judgment. The statute authorizes the judgment debtor's interest in property to be applied toward the satisfaction of the money judgment. The court reasoned that cash is easily applied toward satisfying a judgment, but nonmonetary property is not so easily applied. It must be valued and sold, and section 708.205 does not authorize the judgment debtor to value property unilaterally or put it up for public sale.
Additionally, the plaintiff did not invoke and could not rely on the general turnover statute, section 699.040 because, among other reasons, the statute limits itself to tangible property that can be levied upon by taking it into custody (or tangible, documentary evidence of title to property or a debt). Domain name registration supplies the intangible contractual right to use a unique domain name for a specified period of time. Even if this right constitutes property, it cannot be taken into custody. | | Tags: business litigation internet law | | |
| | Mortgage Tracking System (MERS) Called Into Question | The Supreme Court of Kansas, in the recent decision Landmark National Bank v. Kesler, (--- P.3d ----, 2009 WL 2633640), has called into question the validity of MERS, the mortgage tracking system that currently services an estimated 60 million loans. MERS, (Mortgage Electronic Registration System), was established by Fannie Mae, Freddie Mac, and the mortgage industry in 1997 to record loan assignments electronically. The stated purpose of MERS is to reduce the costs associated with the mortgage banking industry by avoiding the costly statutory requirements of recording each mortgage note transaction in the county land record. It purports to do this by registering MERS as the nominee of the lender and servicer in the county land records, thereby allowing the note to be traded behind the scenes without the need to register each transaction.
The Kansas case involves Boyd Kesler, a borrower who, in 2004, secured a loan from Landmark National Bank (Landmark) with a mortgage on the property in Ford County, Kansas that Landmark subsequently registered with the Ford County Clerk. In March of 2005, Mr. Kesler took out a second mortgage on the same property from Millennia Mortgage Corp (Millennia). The mortgage document on this second loan listed MERS as the mortgagee, acting “solely as a nominee for Lender, as hereinafter defined, and Lender’s successors and assigns.” The document identified Millennia as the “Lender.” Sometime later, Millennia assigned the second mortgage to Sovereign Bank (Sovereign). Relying on the framework of MERS for protection, Sovereign chose not to record the transaction in the Ford County register.
In 2006 Mr. Kesler filed for bankruptcy, prompting Landmark to file a petition to foreclose on its mortgage. Landmark, relying on the Ford County records, served both Kesler and the original note holder on the second mortgage, Millennia, in the foreclosure action. Neither Kesler nor Millennia answered the petition, and the trial court issued a default judgment. As a result, Landmark received the full amount owed on the first mortgage, Kesler received the balance from the foreclosure sale with nothing left to Sovereign.
Upon learning of the default judgment, MERS, as the mortgagee of record, filed a motion to vacate but was confronted with an unsympathetic trial court. The court found that MERS was not a real party in interest and that Landmark was not required to name it as a party to the foreclosure. Applying an abuse of discretion standard, the Kansas Supreme Court analyzed the content of the mortgage document along with other opinions on related matters to conclude that MERS is functionally a straw man with no stake in the outcome of the foreclosure.
It is the Court’s ruling that MERS has no interest in the underlying loan transaction that could prove problematic to the mortgage industry. If MERS is deemed not to have any ownership interest in loans recorded in their name, lien priority issues arise for those mortgages that subsequently were sold in the mortgage instrument market. The practical effect of this decision is that second mortgage holders utilizing the MERS system will have to scramble to re-record their mortgages in order to protect themselves from suffering the same fate as Sovereign.
Given the trend of the nation’s courts to closely scrutinize the transactions underlying the foreclosures plaguing the country as a result of unscrupulous lending practices, it is possible that the Kesler case may prove to be a harbinger of more decisions hostile to MERS in the future. Mortgage lenders and purchasers should keep the decision in mind when drafting or revising their policies regarding recordation and perfection of their interests. | | Tags: business litigation financial industry lender liability | | |
| | Fail to Address Legal Formation at Your Peril |  A team that formed to pursue a $20 million prize from Google is learning the hard way that all businesses – even small ones whose members believe their interests are aligned at the outset – neglect at their peril the necessity of addressing legal formation, operating agreements and property management at the earliest possible opportunity.
In January 2008, four individuals, including Peter Bitar, a businessman, and Mary Cafasso, a former NASA employee, formed a team to pursue a $20 million prize from the Google Lunar X Prize competition to be awarded for successfully landing a robotic rover on the moon. By the end of the year, Bitar had secured a 3-year, $1 million corporate sponsorship. However, shortly thereafter, a rift formed between Bitar and Cafasso and each subsequently attempted to take control over the team’s operations and trademark rights in the name the team had selected at its formation – LunaTrex. Cafasso filed corporate formation paperwork in Nevada and a trademark application (U.S. Patent & Trademark Office Serial Number 77761707). Bitar filed corporate formation paperwork in Indiana and his own trademark application 8 days before Cafasso’s (U.S. Patent & Trademark Office Serial Number 77754594). The team then lost its corporate sponsorship and was suspended from the X Prize competition before Bitar filed a lawsuit in the U.S. District Court for the Southern District of Indiana seeking an injunction against Cafasso and a declaratory judgment that he and his Indiana company owned the trademark. Cafasso moved to dismiss and for injunctive relief against Bitar.
On December 1, 2009, the court issued its order refusing to grant the declaratory relief sought, holding that “[a]warding control of the mark to the plaintiffs alone would ignore the contributions that the rest of the team made to the value of the LunaTrex name” and that “[n]one of the four members of the leadership team…is entitled to use the mark to the exclusion of any of the others.” The court then granted each side’s request for injunctive relief to prevent the other from using the LunaTrex mark without consent, requiring each to post a $10,000 bond to secure compliance with the injunction.
Thus, Bitar, Cafasso and the other LunaTrex team members ended up in materially worse positions than those they held prior to formation of the team, a situation that likely could have been mitigated had the team memorialized its formation at the outset, reduced the rights and duties of each team member to a written operating agreement, and sought registrations for its intellectual property rights. (Under U.S. law, a trademark application may be filed on an intent-to-use basis, as long as the mark is actually used in commerce within 36 months after the allowance is granted by the Patent & Trademark Office.) To be sure, these formalities would not necessarily have prevented the falling-out among the team’s principals, but, properly drafted, they certainly would have given the courts a firmer basis upon which to fix rights going forward, thereby preventing the judicially-imposed gridlock in which the parties now find themselves.
All small business owners and principals owe it to themselves and to their team members to consult with counsel as soon as possible to ensure that corporate and property rights are properly memorialized or registered.
| | Tags: business litigation trademark registration trademarks | | |
| | Use of Celebrities’ Names and Likenesses Without Permission Can Be Costly | Many businesses learn the hard way that even implied use of a famous person’s name or likeness without that person’s permission can be a costly mistake. Jewel Food Stores and Dominick’s Finer Foods, two grocery chains operating stores in the Chicago area, recently were named as defendants in lawsuits filed by basketball great Michael Jordan for publishing ads indirectly referencing Jordan’s 2009 induction into the Basketball Hall of Fame. The ads did not include Jordan’s picture or his name, but he nevertheless alleged in his complaint that the ads suggested an endorsement of the chains’ respective brands. Similarly, Chuck Yeager, the renowned former test pilot who was the first person to fly faster than the speed of sound, recently sued Virgin America for publishing an ad stating: “not unlike Buzz Aldrin or Chuck Yeager, you have the opportunity to be a part of a monumental moment in air travel.” In each case, the claimants have requested injunctive relief and damages.
Rights of publicity and the remedies available for their infringement vary from state to state, with some states offering statutory and/or common law remedies that can be much more far-reaching (and expensive for infringers) than those available in other states. Broadly stated, though, among states that offer remedies, the right usually can be distilled as the right to control any commercial use of a person’s name, image, likeness, or other identifying characteristic. The right is subject to limitations both under state law and under the First Amendment, but the consequences for infringers can be significant.
Businesses must work closely with counsel to carefully consider and plan any use of a third party’s identity in advertisements or other publicity. | | Tags: business litigation privacy | | |
| | Businesses Should Not Wait to Implement Solid e-Discovery Practices | .jpg "Andrew Martin") Although the proposed e-discovery legislation in New York State has yet to be implemented, a decision of the New York Supreme Court, New York County Commercial Division should cause all New York State Court practitioners to take note that e-discovery practice is already upon them. Justice Charles E. Ramos, in Einstein v. 357 LLC, 2009 N.Y. Slip Op. 3261 (N.Y. Cty. 2009), dispensed with the “we have produced what we could find” electronically stored information (ESI) defense by slapping the offending party with an adverse inference sanction. An adverse inference sanction allows the jury to presume that the lost evidence would have contradicted that party’s position at trial. The effect of such an instruction is devastating.
What happened:
Defendants were sued for deceptive practices in the marketing of New York City real estate. Soon after the litigation started defense counsel instructed the company’s IT director to put a litigation hold on relevant information. Faced with allegations of incomplete production of ESI, defense counsel filed an affidavit and represented to the Court that the electronic information was centrally stored and all relevant documents had been produced. At a subsequent hearing, it was discovered that the litigation hold was inadequate in that employees of the company could delete electronic documents in between the time that the company backed-up copies of its network. Furthermore, it was not until the fourth day of hearings that it became known that there were backup tapes available from which to cull data—a fact that had heretofore been affirmatively disclaimed.
According to the IT Director’s testimony, he never told counsel that there was a possibility, notwithstanding the litigation hold, that the Defendants could permanently delete documents without any means of recovery. He continued by testifying that no one asked him to ensure nothing could be deleted. Further testimony confirmed that the specific rules contained in the retention order were not even discussed with the IT Director, nor were examinations of the Defendants’ hard drives performed as ordered.
Lessons to be learned:
Communication between legal counsel and information technology managers is now more important than ever. Ensuring that litigants understand what is and is not possible with respect to information technology is of the utmost importance. Insufficient understanding of the technologies used to store ESI coupled with a lack of communication with the IT departments that are called on to execute e-discovery orders can turn a case in which you should win on the merits into one in which you lose due to discovery sanctions. | | Tags: business litigation discovery e-discovery federal e-discovery rules | | |
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