Connecticut Business Litigation Blog : Connecticut Business Lawyer & Attorney : N. Kane Bennett : Aeton Law Partners LLP : Hartford, Middletown, Glastonbury

Connecticut state court judges recently adopted new electronic discovery rules.  The rules will become part of the Connecticut Practice Book for civil discovery and take effect on January 2, 2012.  

The judges present at the annual meeting unanimously adopted the new electronic discovery rules. You can read the new e-discovery rules here.  I removed the sections not relevant to civil cases.  The new rules or modifications are indicated by the underlined portions of the rule. 

Here is a quick hit list, and my brief commentary, of the new e-discovery rules in Connecticut state courts:

• Definitions of electronic and electronically stored information (ESI) added to the list of definitions.  The new definitions are intentionally broad to adapt to new technology changes.
• Grounds to move for a protective order in discovery include the terms and conditions of discovery of ESI and the allocation of costs between the parties.  This rule permits the court to take into account a series of factors in fashioning a protective order and cost shifting for discovery of ESI.
• Litigants should be disclosing ESI that is readily accessible and likely to lead to the discovery of admissible evidence.  This basically clarifies that reasonably accessible ESI is no different than other types of discovery. 
• Whether a litigant needs to disclose ESI that is not reasonably accessible will depend on a variety of factors that the court may consider. 
• Court can shift the costs of production for ESI.
• ESI added to the list of information a party can demand to inspect.
• Safe harbor from sanctions for not only ESI, but all information, that is lost if the information is lost as the result of routine, good faith operation of a system or process in the absence of showing of intentional actions designed to avoid known discovery obligations.  This rule is based on the federal rule 37(f) safe harbor and the commentary indicates that good faith may require a party to stop or intervene a routine destruction policy.
• Claw back provisions permit a party to notify an opponent of inadvertently disclosed privileged information.  There is a procedure the party must follow upon receipt of the notice.  The rule does not address issues of waiver of privilege by the inadvertent disclosure. 

Until Connecticut courts interpret these provisions, a good resource for attorneys may be found in the commentary to the rules.  Additionally, the new rules are based on  the Uniform Rules Relating to the Discovery of ESI adopted by the National Conference of Commissioners on Uniform State Laws in 2007.  There are various courts in other states that have interpreted these rules. 

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Many business litigation cases require experts in various fields.  I am going to feature experts on this blog in an "ask the expert" series of interviews.  Disclaimer:  I am not endorsing any experts that I feature on this blog or the opinions expressed.  I am posting these interviews to offer my readers some insights from the various professionals that get involved with business litigation cases.

Monique Ferraro is an expert in computer forensics and the principal of Technology Forensics, LLC.  She is also an attorney. The following is my recent interview with Monique. 

Q: What issues do you see in business disputes involving computer forensics:

A: Mostly, we see parties seeking email and deleted email. Increasingly, lawyers are asking for email and all electronically stored information containing metadata in their discovery requests. When they don’t get what they asked for initially, or if the party is not able to produce the information on their own, they call us. We figure out the best way to obtain the information requested without disrupting the business process while maintaining the integrity of the potential evidence and providing a solid chain of custody.

As far as the types of cases, we see computer forensics being requested in every type of litigation, from contract disputes to debt collection, employment litigation and even motor vehicle accidents.

Q: Many people think that when they delete computers docs and emails, its deleted.  In laymans terms, what really happens to it?  Can it be recovered?

A: It’s important to remember that computers were designed by engineers, not lawyers. Lawyers are concerned with precision of language. If you say you deleted something, then you deleted something. It’s gone. Unrecoverable. Engineers think in terms of efficiency.

When computer systems were designed, the engineers who developed them figured it would be more efficient to simply mark the space where information is held as available for reuse rather than truly deleting the file. The process uses less energy and is more efficient than truly deleting the file.

So, when we hit the ‘delete’ key, information isn’t deleted.

What happens is that the computer software goes to the table that keeps track of all the files and where they’re located and makes a check mark indicating that the space where that file is kept can be used for something else. Next time the computer goes to save a file, it can save it to this newly open space. However, because the size of computer storage is so large now, the space left open by the ‘deleted’ file is rarely reused. The original file stays there, lying in storage but with the space marked as available until it is either overwritten or ‘wiped.’

‘Wiping’ refers to really deleting a computer file. To really delete a computer file by wiping, a process is used that both marks the space as available and overwrites the space. Usually, the space is overwritten several times in order to obliterate any data remaining.

Because deleted data isn’t really deleted in the true sense unless it is wiped, most of the time deleted files can be retrieved and fully restored. That is true for files that have been consciously saved as well as data that has not been saved is held in temporary storage, as with Internet data.

Q: What are you seeing in the courts in terms of road blocks to getting access to servers and hard drives?

A: Most of the time, courts have been quite willing to grant discovery of electronically stored information. It gets tricky when litigants ask for a specific file or folder on a network or a targeted hard drive. Parties resist requests that involve having the opposing party’s expert on site, which is what litigants often request when seeking a specific storage device, folder or file. Of course, few businesses welcome the opposing party coming in and accessing their systems and data.

The objections are usually based upon keeping their business and client data secure and confidential and preventing disruption of their business. If there haven’t been discovery abuses and the party is trustworthy, the court usually allows the business to hire its own expert. To validate the acquisition of potential evidence, there are several methods that can be used, from documenting the process in writing to videotaping it, that can minimize the intrusion into business information and keep business disruption to a minimum.

Q: How do attorneys get access to emails that are on ISP accounts like Comcast, or third party servers like Gmail?

Most ISPs require a subpoena or court order to release information. It depends on the service provider, the information you’re looking for and who you’re requesting the information about. It’s best practice to contact the legal department of the ISP and ask them what they need and how they want it in order to get the results you seek. It may be that you’re legally entitled to the information, but if you don’t request if in the form that the ISP wants you to ask it in and from the person they designate, you won’t get what you’re looking for. It’s important to bear in mind that quite a lot of Internet service provider information is held in storage for a limited amount of time and that by the time there’s a lawsuit pending, the information is long gone.

Q: What issues have you seen with forensics and social media sites like Facebook, MySpace and Twitter?

A: Usually, we’re asked to mine data from social media sites as part of the whole process of investigating a specific person or case. It’s often an adjunct to the larger inquiry that helps to establish that we have the right information or to identify someone a target is communicating with. Of course, in some cases, the use of the social media is an issue in a case, and gaining the posting history is the challenge for the forensic examiner.

Q: Is it a good idea to work with an attorney early in an investigation?

A: We prefer to contract with the attorney representing the business because that’s the best way to protect our work product from being discovered by the opposing party. Attorney-client privilege extends to us if the attorney contracts with us. That provides the business with the same sort of protection of confidential information that they enjoy in their relationship with their attorney.

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Lawyers are all over Facebook and LinkedIn.  What are they doing?  If they are not marketing or social networking, they are fishing or "mining" for information about individuals and businesses.  They are looking for this information to help with lawsuits.  The business and employment trends involving social media are growing and as a result we will continue to see a variety of different lawsuits and legal issues involving some aspect of Facebook, LinkedIn, Twitter, MySpace and YouTube.  For example, read the posts yesterday by Dan Schwartz's Employment Law Blog detailing how privacy settings on Facebook permit easier production in electronic discovery and how facebook wall postings might be unavailable in discovery and deemed private. 

One of the issues lawyers will have to address when mining for data on Facebook and other sites is how to get the information.  Do you seek the material in discovery and possibly risk a judge deeming the information unavailable as private or irrelevant?  Do you just limit your search to what is publicly available?  Better yet, what about having an investigator try to "friend" your target so you can get access to the information that is not available to public searches?   If you are concerned about the ethics of this type of searching, you good instincts. 

Lawyers fishing on Facebook would be well advised to read through a few ethical opinions on the issue. Recently, the New York Bar Association issued an opinion related to ethical concerns for lawyers "fishing" for information and evidence on Facebook and LinkedIn.  The verdict?  Relying in part on a 2009 Pennsylvania Bar Association opinion, it was deemed ethical for lawyers to search for this information from public pages.  Seeking to "friend" for improper purposes, however, is more problematic and may land a lawyer in ethical trouble.  Specifically, if deception was used (by either the lawyer or a third party directed by the lawyer) to gain access as a "friend," it likely would violate the rules of professional conduct. 

Clearly, LinkedIn and Facebook are treasure troves for litigation attorneys.  However, it is a good idea to be cautious about how you access any information from these sites, especially if the information is not generally available from public searches. 

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In the recent federal district court decision of Pension Committee of the University of Montreal Pension Plan v. Banc of America Securities (download here) ,  Judge Shira Scheindlin clearly explained  and amplified the obligations to preserve and produce electronically stored evidence in litigation cases.  The case was brought by a group of investors seeking to recover 550 million dollars in losses from a hedge fund liquidation. 

The defendants in the case alleged that the plaintiffs failed to preserve electronically stored documents and filed misleading statements regarding discovery.  In deciding against the plaintiff's on discovery issues, Judge Scheindlin summarized discovery obligations and stated:

the courts have a right to expect that litigants and counsel will take necessary steps to ensure that relevant records are preserved when litigation is reasonably anticipated, and that such records, are collected, reviewed, and produced to the opposing party....when this does not happen, the integrity of the judicial process is harmed and the courts are required to fashion a remedy...By now, it should be abundantly clear that the duty to preserve means what is says and that a failure to preserve records - paper or electronic - and to search in the right places for those records, will inevitably result in the spoliation of evidence. 

Judge Scheindlin's decision is very lengthy and detailed.  You might ask, why should a company doing business in Connecticut care about what Judge Scheindlin says in a New York federal district court case?  Well, for starters, Judge Scheindlin is perhaps the most quoted and cited trial judge in the United States concerning electronic evidence following her series of decisions in the now famous case of Zubulake v. UBS Warburg.  Another reason is that Connecticut state court rules on obligations to preserve and produce electronically stored information are not well established or defined.  As such, a state court trial judge in Connecticut is very likely to be persuaded by anything Judge Scheindlin says on the issue of electronic discovery and, in particular, on obligations to preserve and produce electronic evidence, sanctions for failure to do so properly, and the cost and expense of producing such evidence.

Anyone facing potential litigation or reasonably anticipating litigation in Connecticut should understand the obligations to preserve and produce evidence.  Although Judge Scheindlin stated that these obligations should be abundantly clear, the fact is, they either are not clear or they are often ignored.  Every week, there are numerous case reports from across the country involving spoliation, destruction, and mishandling of electronic evidence.  Many times, the failure to preserve critical evidence happens well in advance of the litigation because the duty to preserve is overlooked, ignored, or not understood.

The full scope and extent of discovery obligations is too in depth for a blog post.  Nevertheless, Judge Scheindlin's decision provides a framework for understanding some basic obligations and rules.  Here is my summary take away from the case:

•  Any individual or business that reasonably anticipates litigation must issue a "timely" litigation hold in writing.  This means steps must be taken to preserve evidence and to stop its destruction. This also means that the duty to preserve evidence arises before litigation ever happens.  The duty to preserve arises when litigation is "reasonably anticipated."
• Failure to initiate a written litigation hold may constitute gross negligence.
• Failure to properly collect evidence from key players in the dispute is gross negligence or willfulness.  This means that evidence must be collected from the individuals that are most involved in the dispute. This type of conduct is more culpable and likely to lead to sanctions.
• Destruction of emails or backup tapes after the duty to preserve arises may also consitute gross negligence and willful misconduct.
• Failure to obtain evidence from "all" employees, as opposed to key players, is likely ordinary negligence and a lower degree of culpability.
• Failure to take all appropriate measures to preserve electronically stored information is negligence and less culpable.

Failure to follow the above framework may result in sanctions ranging from fines and cost shifting to dismissal, preclusion of evidence, or an adverse inference instruction to the jury at the time of trial.  The sanction will depend on the degree of culpability ranging from negligence to gross negligence to intentional conduct.  The scope of sanctions will also depend on the relevance of the missing evidence and the prejudice to the innocent party.

The obligation to preserve evidence must be taken seriously once litigation is "reasonably anticipated."  The sanctions that can result from failure to abide by these obligations can dramatically impact the result of a lawsuit and can cause a party to lose an otherwise meritorious claim or defense.  Improper handling of electronic discovery can also cause an expensive detour in a litigation case that can be avoided with proper care and attention to discovery obligations.

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Here is a round up of a few interesting business lawsuits making news in Connecticut this past week: 

Smoking Gun "Crap" Email In Case Watched by Wall Street

In Pursuit Partners, LLC v. UBS AG, et al., a 35 million dollar prejudgment remedy was awarded in favor of a Connecticut hedge fund against UBS.  Judge Blawie issued the order in Stamford Superior Court after finding the bank was in possession of material non-public information regarding downgrades to financial products that UBS continued to sell.  This case is getting a lot of attention on Wall Street and reported on by Matthew Goldstein  at seekingalpha.com and Serena NG and Carrick Mollenkamp on WSJ.com. 

The UBS case will be interesting to watch and is another example of the increasing importance of discovering smoking gun emails.  Preliminary discovery in the case turned up internal emails calling some of the financial products "crap."   Here is a docket report on the case. (download).

Fairfield Company Uncovers Fraud and Ejects Board Member

Competitive Technologies (CTT), won a contested default judgment for more than $4 million dollars after discovering a former board member took company money and invested it in a fictitious South American company that did not exist.  Read the report on the case by Michael Juliano of the Connecticut Post.  You can also download here a copy of the judgment from Judge Dorsey who found that the defendants willfully disregarded court orders.  

The fraud was uncovered in part by the work of Breen & Associates.  I have worked with Bill Breen before on several cases.  He is an exceptional fraud investigator and expert.  Looks like he successfully uncovered another financial fraud for a business client.   

Civil Rights Violations Alleged Against Litchfield In Refusing Jewish Temple

Rabbi Joseph Eisenbach has filed a lawsuit in federal court against the Town of Litchfield over the Town's refusal to permit modification of his property for religious purposes.  The complaint (download here) states that the Rabbi is seeking declaratory relief, permanent injunction, and damages for violations of civil rights and the Religious Land Use and Institutionalized Persons Act of 2000.  This case was reported on by Christine Stuart, editor of  CTNews Junkie where a reader left some disturbing comments about anti-semitic statements at the commission hearings on the matter. 

An attorney for the Town has not yet appeared in the case and no answer has been filed. Given the allegations in this Complaint, this is a case that is likely to stay in the news. 

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