The Qualcomm e-discovery saga of lying and cheating finally ended, not with a bang of severe sanctions as most hoped and expected, but with a whimper. The federal court in Qualcomm’s home town talked tough, and spelled out “monumental discovery violations,” including lying and fraud on a grand scale. But in the end it was just empty talk, and, despite the headlines you might have read to the contrary, no serious sanctions were imposed.
The 48 page Sanctions Order dated January 7, 2008, by Magistrate Judge Barbara L. Major does a good job of summarizing the truly incredible litigation misconduct by Qualcomm and its attorneys. Order Granting in Part and Denying in Part Defendant’s Motion for Sanctions and Sanctioning Qualcomm, Incorporated and Individual Lawyers. Most of the malfeasance discussed there had already been described by the trial Judge, Rudi M. Brewster, in his Order on Remedy for Finding of Waiver of August 6, 2007, Qualcomm Inc. v. Broadcom Corp., No. 05-CV-1958-B(BLM) Doc. 593 (S.D. Cal. Aug. 6, 2007). I summarized this order and other prior activity in this case in my two prior blogs: Heavy Sanctions Loom Against Attorneys for e-Discovery and other “Aggravated Litigation Abuses” and Qualcomm Update.
Although most of the lawyer and litigant misconduct was described in the prior Waiver Order, Judge Major’s Sanctions Order does include a few new and noteworthy facts which reveal the bold enormity of their ways. The Sanctions Order also provides good perspective on how our discovery system of justice depends upon the good faith of the parties and active, honest participation of their attorneys. This dependence on the integrity of lawyers, who are supposed to act advocates for their client, and as officers of the court, underscores the vulnerability of the system is to unethical lawyers:
The Federal Rules of Civil Procedure require parties to respond to discovery in good faith; the rules do not require or anticipate judicial involvement unless or until an actual dispute is discovered. As the Advisory Committee explained, “[i]f primary responsibility for conducting discovery is to continue to rest with the litigants, they must be obliged to act responsibly and avoid abuse.” Fed. R. Civ. P. 26(g) Advisory Committee Notes (1983 Amendment). The Committee’s concerns are heightened in this age of electronic discovery when attorneys may not physically touch and read every document within the client’s custody and control. For the current “good faith” discovery system to function in the electronic age, attorneys and clients must work together to ensure that both understand how and where electronic documents, records and emails are maintained and to determine how best to locate, review, and produce responsive documents. Attorneys must take responsibility for ensuring that their clients conduct a comprehensive and appropriate document search. Producing 1.2 million pages of marginally relevant documents while hiding 46,000 critically important ones does not constitute good faith and does not satisfy either the client’s or attorney’s discovery obligations. Similarly, agreeing to produce certain categories of documents and then not producing all of the documents that fit within such a category is unacceptable. Qualcomm’s conduct warrants sanctions.
Qualcomm had opposed the entry of any sanctions against it, by arguing that it was all their attorneys fault. The nineteen accused attorneys argued just as vigorously that it was all Qualcomm, that they were hoodwinked by their client. The Judge did not believe either side, and decided sanctions were appropriate against both.
The Court’s review of Qualcomm’s declarations, the attorneys’ declarations, and Judge Brewster’s orders leads this Court to the inevitable conclusion that Qualcomm intentionally withheld tens of thousands of decisive documents from its opponent in an effort to win this case and gain a strategic business advantage over Broadcom. Qualcomm could not have achieved this goal without some type of assistance or deliberate ignorance from its retained attorneys. Accordingly, the Court concludes it must sanction both Qualcomm and some of its retained attorneys.
Qualcomm’s misconduct was fairly obvious, it intentionally withheld over 46,000 emails and documents that were requested in discovery, and that Qualcomm agreed to produce. Moreover, these 46,000 documents were key to Qualcomm’s entire case, and they knew they would lose if they were discovered by the other side. The court found that Qualcomm, the plaintiff, filed the suit with the intention of secreting this key evidence so that they would have a chance of winning. They did succeed in hiding the 46,000 until trial, which they lost anyway, and then their fraud was discovered. The court called this a “monumental and intentional discovery violation.” I am sure that everyone who litigates for a living, like I do, agrees.
The court could not believe that Qualcomm and its in-house attorneys could have carried out this kind of massive conspiracy to conceal eviedence without the knowledge and participation of its outside counsel. If they truly knew nothing, then it was only because they acted like the three moneys who did not want to know. It was gross negligence on their part not to know.
Qualcomm protected both itself, and its outside counsel, by refusing to waive its attorney client privilege. Since all of the communications between Qualcomm and its attorneys were secret, it was impossible to find direct evidence of outside counsel’s involvement in the conspiracy, and so the evidence against the attorneys was circumstantial.
Neither party nor the attorneys have presented evidence that Qualcomm told one or more of its retained attorneys about the damaging emails or that an attorney learned about the emails and that the knowledgeable attorney(s) then helped Qualcomm hide the emails. While knowledge may be inferred from the attorneys’ conduct, evidence on this issue is limited due to Qualcomm’s assertion of the attorney-client privilege.
Thus, the Court finds it likely that some variation of option four occurred; that is, one or more of the retained lawyers chose not to look in the correct locations for the correct documents, to accept the unsubstantiated assurances of an important client that its search was sufficient, to ignore the warning signs that the document search and production were inadequate, not to press Qualcomm employees for the truth, and/or to encourage employees to provide the information (or lack of information) that Qualcomm needed to assert its non-participation argument and to succeed in this lawsuit. These choices enabled Qualcomm to withhold hundreds of thousands of pages of relevant discovery and to assert numerous false and misleading arguments to the court and jury. This conduct warrants the imposition of sanctions.
The court goes into great detail as to the wrongs committed by each attorney, including intentional lying to the trial Judge, and then summarizes the attorneys’ malfeasance as follows:
. . . the evidence establishes that Qualcomm intentionally withheld tens of thousands of emails and that the Sanctioned Attorneys assisted, either intentionally or by virtue of acting with reckless disregard for their discovery obligations, in this discovery violation.
You may question how wimpy sanctions could possibly have been entered after reading those quotes. You may also wonder why I say this, if you have read the news headlines saying Qualcomm was sanctioned with an $8,568,633.24 attorney fee award. That is a pretty stiff sanction you might think. But these headlines, like the sanctions, are smoke and mirrors. In fact, the Sanctions Order imposed no new monetary penalties on anyone. Qualcomm had already been ordered to pay $8,568,633.24 in fees in the underlying case in Judge Brewster’s Order Granting Broadcom Corporation’s Motion for Exceptional Case Finding and for an Award of Attorney’s Fees. All the Sanctions Order did was provide another basis for the same award. The court makes clear that Qualcomm will not have to pay twice. So the real effect is a zero sanctions fee award against Qualcomm. No fines or other penalties were imposed on Qualcomm. So much for hash sanctions against Qualcomm. Judge Major no doubt realized that eyebrows would be raised by this decision, and so she attempted to explain her rationale in footnote 17 as follows:
Because the attorneys’ fees sanction is so large, the Court declines to fine Qualcomm. If the imposition of an $8.5 million dollar sanction does not change Qualcomm’s conduct, the Court doubts that an additional fine would do so.
Hmm, not quite sure I follow that logic, but I am sure Qualcomm and its shareholders were relieved.
But what about their attorneys? Nineteen attorneys had been ordered by Judge Brewster to show cause to Judge Major why severe sanctions should not be imposed for their misconduct in this case. Qualcomm Inc. v. Broadcom Corp., No. 05-CV-1958-B(BLM) Doc. 599 (S.D. Cal. Aug. 13, 2007). The sanctions Judge Brewster asked Judge Moody to consider included requiring “counsel’s formal disclosure of this Court’s findings to all current clients and any courts in which counsel is admitted or has litigation currently pending.” Now that would have been a severe penalty. But it was not imposed by Judge Moody, it was not even discussed.
Instead, all but six of the nineteen attorneys ordered to show cause got off with no penalties at all. Five attorneys were sanctioned from Day Casebeer, a small IP firm, and only one from Heller Ehrman, a large firm based in San Francisco. The two law firms themselves were not sanctioned at all.
Two of the attorneys in the Heller Ehrman firm successful defended themselves by arguing they were just acting as local counsel. I am surprised this defense was accepted. Yet here are Judge Major’s own words:
These attorneys primarily monitored the instant case for its impact on separate Qualcomm/Broadcom litigation. However, for logistical reasons, both attorneys signed as local counsel pleadings that contained false statements relating to Qulacomm’s non-participation in the JVT. Given the facts of this case as set forth above and in the declarations, the limitations provided by the referral, and the totality of the circumstances, the Court finds that it was reasonable for these attorneys to sign the pleadings, relying on the work of other attorneys more actively involved in the litigation.
The judge’s words may seem reasonable, but I am surprised because it is completely contrary to anything I have ever previously heard a federal judge say about acting as local counsel. Judge Major again recognizes her unusual leniency and tries to explain it in footnote 14:
The Court is declining to sanction these attorneys for their role in signing and filing false pleadings, but the Court notes that sanctioning local counsel for such conduct is possible and may be imposed in another case under different circumstances. Attorneys must remember that they are required to conduct a reasonable inquiry into the accuracy of the pleadings prior to signing, filing or arguing them.
The sanctions against the six lawyers were, in my opinion, relatively mild. No fees were taxed, nor fines imposed. They were just ordered to provide a copy of the orders to the state Bar for “appropriate investigation.” Of course the Bar in California already knew about this case. Bar investigations were probably inevitable anyway. All this Sanctions Order did was let most of the attorneys off the hook. Moreover, I am told that under the California Bar Ethics Code, a Judge is required to report lawyer misconduct that they witness. So the judge was already required to turn them in. Bar investigations will be conducted, to be sure, and there will be some penalties imposed, but I doubt they will amount to much. They will certainly be far less than the ultimate penalty of disbarment imposed against President Clinton for purportedly failing to understand what “sex” is. It will also be far less that the client and judge letter writing penalties that Judge Brewster suggested.
The final sanction was to order the six outside attorneys, along with five Qualcomm in-house counsel that the court found complicit in the fraud, to participate in what the court called a CREDO program (“Case Review and Enforcement of Discovery Obligations”). It requires the eleven lawyers to meet and prepare a memorandum on how to avoid this kind of incredible e-discovery fraud from reoccurring in the future. Judge Major really seems to think that these discredited attorneys will somehow be redeemed by studying what went wrong and writing a great memo. In her words:
While no one can undo the misconduct in this case, this process, hopefully, will establish a baseline for other cases. Perhaps it also will establish a turning point in what the Court perceives as a decline in and deterioration of civility, professionalism and ethical conduct in the litigation arena. To the extent it does so, everyone benefits – Broadcom, Qualcomm, and all attorneys who engage in, and judges who preside over, complex litigation. If nothing else, it will provide a road map to assist counsel and corporate clients in complying with their ethical and discovery obligations and conducting the requisite “reasonable inquiry.”
Sorry, but I think this is naive. In my opinion, it is like catching the fox in the hen house, and then “punishing” it by asking for a memo on how to improve hen house security. These are not the right attorneys to turn to for advice on how to fix e-discovery. They might as well have been ordered to write “I will not cheat and lie” on the blackboard a thousand times.
The lawyers should have been sanctioned with high monetary fines and ordered to write the client and judge letters a thousand times, not a CREDO memo. Then a strong message would have been sent to the Bar. Then the very small minority of attorneys who commit these types of wrongs might think twice. They might act like the vast majority of lawyers in this country do every day, they might choose honor and integrity over the temptations of the fast buck from an unscrupulous client. This was an opportunity missed.