Happy Thanksgiving!

I for one plan to celebrate Thanksgiving by spending more time with the family and less time with the law, at least for a while. Still, it’s not Thanksgiving yet. So I’ll venture a short e-discovery essay with some sort of gratitude theme. But first of all, let’s start with a little humor and allow me to express my thanks that my family scene is more like the original Norman Rockwell shown right and not the “redneck” version below! On a serious note, I am thankful for many things this year, and recall the words of the great Christian mystic, Meister Eckhart, who said “If the only prayer you said in your whole life was, “thank you,” that would suffice.”

I am also grateful that I did not represent the defendant in Pinstripe, Inc. v. Manpower, Inc., 2009 WL 2252131 (N.D.Ok., July 29, 2009). The primary issue addressed in this order by United States Magistrate Judge Paul J. Cleary is who should be sanctioned for spoliation of evidence – the usual, email of course. Should it be defendant’s local counsel, defendant’s large national counsel, McGuire Woods, or the defendant itself. The plaintiff naturally wanted monetary sanctions imposed against them all, and their little dog too, and adverse inferences, and costs, and a default judgement, and whatever else they could get. Plaintiff got a sanction all-right, but unfortunately for them, it was more in the whatever category, and certainly not high-up on their wish list of hoped for punishments. I’ll get to that at the end as a just desert.

This sanctions case flows from Qualcomm and the ethics question of the hour – whose to blame: in-house or out-house? The underlying issue is where does the Zubulake Duty fall? On the shoulders of outside counsel alone or in-house counsel alone, or on both, or what? The correct answers is, I think, like many in the legal world: it depends. It depends upon all of the surrounding facts and circumstance of the case, who said what, and who did what?

Of course, since it depends on all of these facts, there goes the old privilege and work product protections, and instead, here comes discovery about discovery. This is not a place you want to be and smart attorneys go to great pains to avoid this turkey. They should never let the delicious email go to waste. They should get it on their plate and eat it as fast as they can. Because if they don’t, and it spoils, then the blame game can follow next, and then everybody on your side gets food poisoning.

This conflict on whose duty it is, has become a real source of tension between in-house counsel and retained counsel. The law is unclear and this greatly exacerbates the problem. So too does the recession, or depression, or whatever you want to call the economic pressure cooker we are now in. What is outside counsel to do when, for instance, in-house counsel says: don’t worry, we’ll handle it. You just try the case and we’ll take care of the ESI preservation, retrieval, and the like. I have written about this before in In-House Counsel Sanctioned for Defendant’s Failure to Preserve Evidence. I also talked about this recently at the Georgetown Advanced e-Discovery Institute in D.C. during the Ethics panel with Judge Facciola, Ariana Tadler, and Ed Rippey. Everyone agreed this is one of the most pressing discovery ethics problems of our day.

The Pinstripe case is a good illustration of this tension in an everyday kind of garden variety commercial dispute. The case was big enough for the defendant, Manpower, Inc., to have both local counsel and national counsel going up against an Oklahoma corporation represented by a hometown law firm in Tulsa. The local plaintiff’s counsel not only came after the defendant and its big firm counsel, they also sought sanctions against their fellow Tulsa counsel for defendant. Local counsel then employed the classic Sargent Schultz defense. Schultz, of course, was the lovable prison guard (you don’t hear that often) in Hogan’s Heros who made a point of seeing and knowing nothing, nothing – that might get him into trouble. This is the defense that any local counsel would employ in this situation, and it worked like a charm. Here is how Judge Cleary put it:

The Court finds no basis for a sanction award against the Crowe & Dunlevy (“C & D”) law firm. C & D served as local counsel in this matter, but had little, if anything, do so with formulating or monitoring Manpower’s discovery responses. C & D was not involved in the discovery exchanges between Manpower and McGuireWoods and C & D did not even know there was a discovery dispute between Manpower and AK until Feb. 18, 2009.

Id. at *2. One wonders what they did do. Apparently, they were able to act as local counsel without signing discovery pleadings, which is, in my experience, fairly rare. They should give thanks for that ruling.

Next the Tulsa firm for the plaintiff went after the big boys, the McGuire Woods law firm, who apparently acts, or at least did, as national counsel for Manpower, Inc. I know a few of the McGuire Woods e-discovery specialists and they are a good firm. If it can happen to them, it can happen to you too. They were the law firm in the know as to the e-discovery in this case, at least up to a point, then they too turned into Schultz. The plaintiff’s firm knew they were in charge, and having read Mancia v. Mayflower, or at least the parts on Rule 26(g), moved for “sanctions against Manpower’s counsel for their wrongful certification that Manpower’s discovery production was complete.” Id.

Here is how the court then gave McGuire Woods something to be thankful for:

B. Sanctions Against McGuireWoods

The records evidence establishes that McGuirewoods worked on a revised document retention policy for Manpower. The policy required retention of relevant documents once a lawsuit was filed. If employees had any questions about a document, they were to contact the legal department. McGuireWoods drafted a litigation hold for Manpower and sent it to the client shortly after this lawsuit was initiated in Tulsa County District Court. The firm believed the litigation hold was in effect; however, some 14 months later it was learned that Manpower had never put the litigation hold in place. In the meantime, McGuire-Woods, relying on representations of Manpower, told AK that document production was complete. That, it turned out, was false.

*3 The record reflects that McGuireWoods sought to confirm with its client that all documents responsive to AK’s discovery requests had been produced. Fed.R.Civ.P. 26 provides that by signing a discovery request or response, an attorney is certifying its reasonableness. The Advisory Note to the 1983 Amendment to Rule 26 provides: “In making the inquiry, the attorney may rely on assertions by the client and on communications with other counsel in the case as long as that reliance is appropriate under the circumstances. Ultimately, what is reasonable is a matter for the court to decide on the totality of the circumstances.”

The Court finds that McGuireWoods made reasonable inquiry as to the completeness of Manpower’s document production and relied on the client’s representations in that regard. Accordingly, I find that sanctions are not warranted against McGuireWoods.

I doubt that every judge in the country would be as lenient as Judge Cleary was here. The opinion states that all that outside counsel did was prepare and send a litigation hold notice to the client. That is really pretty hard to believe. Normally there would be some communication by and between outside counsel and inside counsel on the preservation notice, an email, a mention in a phone call, or something. But apparently they never talked about it at all. I am quite sure that is not their standard practice, and most certainly is not a best practice. It is a fluke to never mention it. There should normally be follow-up of some kind.

But wait, there is still more. Judge Cleary also appears to say that defense counsel had no involvement whatsoever in their client’s e-discovery process. Not only were they uninvolved in the preservation, beyond drafting a letter, but they were absent from the identification, collection, processing, analysis, and review as well. Apparently, they delegated the entire process to the client and relied upon the client’s representations, which, according to Judge Cleary, proved to be false. This sounds a lot like the empty head, pure heart defense, an approach that many judges strongly reject. McGuire Woods should be grateful for this lenient ruling.

Judge Cleary in Pinstripe concludes that it was enough for outside counsel to just ask their client if that was everything. To justify this Judge Clearly relies upon the Rule Commentary, which says that reliance on a client’s assertions alone may sometimes be sufficient, depending on the circumstances, to satisfy the reasonable inquiry duty of Rule 26(g). The problem is, Judge Cleary does not go on to explain what those circumstances were in this case and so the usefullness of this opinion is quite limited.

Many facts are left unsaid here. I must, for instance, assume that Manpower has its own in-house counsel, and probably an experienced one at that, who just happened to make an honest mistake. I only wish that Judge Cleary had gone into more detail on these facts. Since they are absent, the opinion can be misconstrued to mean that compliance with Rule 26(g) merely requires a phone call to the client. There may well be circumstances where such reliance is appropriate, especially in low dollar cases with known competent in-house. But in many, perhaps most circumstances, a phone call alone is certainly not reasonable diligence. Outside counsel are in charge of discovery, not the parties, even if they have their own in-house counsel. Most judges will not tolerate such over-delegation of discovery responsibilities by the counsel of record to the party, except, as mentioned, in extraordinary circumstances.

As to the party itself, Manpower, Inc., Judge Cleary concluded:

It is clear that Manpower failed to meet its obligations to preserve possibly relevant documents for use in this lawsuit. Manpower failed to issue the litigation hold drafted by McGuireWoods and failed to monitor compliance with the oral instructions given to some Manpower managers. As a direct result, possibly relevant e-mails were destroyed.

From my review of the record evidence and counsels’ presentations at the July 13 hearing, I conclude that Manpower’s conduct was not intentional and does not reflect that documents were deliberately destroyed because the company believed its defense to this action is weak or otherwise vulnerable. Thus, I do not find a basis for the extreme sanctions of default judgment or adverse inference instruction. Clearly, however, an appropriate sanction is merited.

Id. at *3. Once again, Judge Cleary does not share with us the facts that persuaded him to conclude that this was just negligence, and not bad faith, but he does go on to include a good summary of the law:

*4 Some courts have found that mere negligence is sufficient to establish a “culpable state of mind” for purposes of an adverse inference instruction. However, that is not the rule in this Circuit. Aramburu v. The Boeing Company, 112 F.3d 1398, 1407 (10th Cir.1997) (“mere negligence” in losing or destroying records is not enough to reflect consciousness of a weak case.). Bad faith is required. “The adverse inference must be predicated on the bad faith of the party destroying the records.” Id. The Court finds that Manpower’s conduct did not amount to bad faith and, thus, an extreme sanction such as adverse inference or default judgment is not warranted.

Conclusion

Now for the just deserts. Since there was no bad faith, no default was entered, no adverse inference instruction provided, and no fees or costs were taxed against anyone in Pinstripe, Inc. v. Manpower, Inc. Manpower should be grateful here too, for the ruling against them could have been far worse.

Judge Cleary did, however, want to send a message of some kind. He obviously felt that some sort of sanction should be entered against Manpower for the negligent conduct he had seen (but did not care to describe in any detail). So, he proved just how creative jurists in Oklahoma can be. He ordered Manpower to “contribute the sum of $2,500 to the Tulsa County Bar Association to support a seminar program on litigation hold orders, and preservation of electronic data.” Id. at*4. I kind of doubt that I will be invited to speak at that one, but anyway, I am glad to see some good come out of this turkey.

In closing, please consider these Thanksgiving words:

As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.

John Fitzgerald Kennedy

2 Responses to Happy Thanksgiving!

  1. Craig Ball says:

    Your customary nice job. Appreciate the Kennedy sentiment as well. Happy Thanksgiving. Craig

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  2. Jeff Reed says:

    Great post Ralph. Points out two things –

    First, judges are not yet creating the kind of consistent decisions that makes predicting outcomes either easy or certain. Seems somebody should be taking home a Dumb Attorney Award, but everyone seems to have avoided it. Yet we don’t know how because there aren’t enough facts to figure it out exactly.

    Second, even with the absence of a “real” sanction, this case points out the risk of failing to communicate with your own team. As an ex-in-house litigation counsel, I’m all for saving money by bringing tasks in-house and essentially paying wholesale rather then retail. But in-house counsel need to recognize the risks of not only being sanctioned themselves (as in the Swofford case you allude to) but also causing more widespread mayhem among their out-house counsel (another chair I’ve had the good fortune to occupy). With today’s ediscovery platforms incorporating all the reporting features that they do, it’s easy to set up a system of reporting that allows everyone to be informed of the status of any ongoing project. How can the court room team know how to defend the in-house actions if they don’t know what’s been done, what’s left to do and how long it will take?

    Seems only the plaintiffs have little to be thankful for – other than your commentary.

    Give the quill some rest and enjoy the holiday.

    Jeff Reed

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