U.S. District Court Judge T. John Ward of patent law fame has recently issued an opinion on e-discovery sanctions. Green v. Blitz U.S.A., Inc, 2011 U.S. Dist. LEXIS 20353 (E.D. Tex. Mar. 1, 2011). It is an important one to know about. The defendant relied solely on its own employees to find and produce relevant emails, a practice called self-collection. To make matters worse, they put a manager in charge of this effort who fancied himself “about as computer literate—illiterate as they get.” Id. at pg. 12. There are many dangers inherent in self-collection, including good faith omission by inadvertence, laziness, or lack of technical or legal training. But the chief danger is bad faith omission by fraud, by the natural desire of a witness to protect him or herself by not producing incriminating emails. This is the fox guarding the hen house scenario that represents the greatest danger of self-collection.
Many try to mitigate these risks by following a two-fold collection system, one that adds an extra level of protection to self-collection. This is appropriate in cases that are large enough to warrant the additional expenses involved. In such dual protection systems the key custodians still search, identify, and self-collect what they think are relevant emails, but, as a fail safe, IT also collects all of the key custodians’ emails. Then attorneys search and identify relevant documents from this full, uncensored, unfiltered, collection. This double effort guards against the intentional and unintentional mistakes that can sometimes arise in self-collection.
The defense attorneys in Green did not use this double check procedure, even though this was a wrongful death case. They over delegated to the client, much like the lawyers in In re A & M Florida Properties II, LLC, 2010 WL 1418861 (Bankr. S.D.N.Y. Apr. 7, 2010). The client in Green, as in A&M Florida, totally botched the effort. In fact, the court in Green was convinced that key emails were overlooked on purpose. Green v. Blitz U.S.A., Inc, supra at pg. 10.
Unfortunately for the defendant corporation in Green, one of their key custodians, the one they put in charge of the whole investigation, looks like a fox, and I don’t mean a FireFox. The result here was the worst case scenario that can come from self-collection – bad faith withholding of evidence. The sanctions entered by the court as a result were potent and unusual. To appreciate these sanctions, with which the Green opinion both begins and ends, we need to understand the story behind this case. We need to understand the timing and circumstances of the discovery of the illiterate fox.
The Story of Green v. Blitz USA, Inc.
Rene Green is a widow. She filed suit against Blitz USA, Inc, the manufacturer of the gas can that killed her husband, Brody Green. Unlike 98% of all law suits filed in America, this dispute did not settle. Rene decided to roll the dice and go to trial in federal court in Marshall, Texas. She wanted her day in court. Rene claimed the gas can should have had a flame arrester, and that would have saved Brody’s life. The defendant claimed that flame arresters are not effective, so it was not negligent for it to manufacture and sell a can without a flame arrester. By the way, multiple people have been injured by these cans, and this is just one of many cases, although the first to go to trial.
Apparently the trial did not go as well as the widow hoped, the evidence was not as strong as she would have liked. Both sides had presented their case, both sides rested. All of the evidence was in, the closing arguments to the jury had been made. The jury had left the court room to deliberate, to decide the parties’ fate. This is a very nerve racking time. Both sides typically then just sit around. They wait around for the jury verdict. It could take an hour. It could take days.
At that point in the legal process the widow, Rene, got cold feet. Before the jury returned with their verdict, she entered into a high-low settlement agreement with defendant. The parties agreed upon a range of damages that would be paid, depending on how the jury ruled. This is a common way for both sides in litigation to mitigate the risks of a jury decision. It caps the high side of a jury award, thus protecting the defendant from a run-away jury, but at the same time provides a minimum floor for any payment, protecting the plaintiff from a miserly jury. In this case, the defendant not only got a ceiling to any award, but also a promise of a release and dismissal:
While the jury deliberated, the parties entered into a high-low agreement through which the parties agreed that, regardless of the verdict, Plaintiff would dismiss the case with prejudice and that the parties would execute a traditional release.
Id. at fn. 2.
After the parties signed the high-low agreement, the jury returned. They ruled unanimously in the widow’s favor, but the amount they awarded triggered a payment by defendant at the low end of the settlement agreement. Something of a Pyrrhic victory for the plaintiff. The settlement payment was made. The case was dismissed and a release was executed by the plaintiff. The case was over. A year passed. End of story. Or so you would think.
But in fact, just like in Qualcomm v Broadcom, the e-discovery story here begins after the trial. In fact, in Jones it begins a year after the trial. You see, when there is fraud, or even the stink of fraud, the case never ends. The law deplores the fraudulent fox, especially if it starts fires.
The Post-Trial Discovery of “e-Discovery Fraud”
Recall that in Qualcomm, the plaintiff, Qualcomm, lost the jury trial. Right after the trial the plaintiff discovered and proved fraud in e-discovery. The defendant proved that Qualcomm had been hiding thousands of emails adverse to its case. This led to an very public airing of dirty e-discovery laundry. The net result was a sanction of over a million dollars against Qualcomm, and a trial against Qualcomm’s attorneys over their questionable conduct in the fraud. (A trial, which, by the way, they won, by convincing the court they were merely negligent.)
Here, as in Qualcomm, after the trial the winner, the plaintiff, discovered e-discovery fraud by the defendant, Blitz U.S.A., Inc. In Qualcomm this discovery happened right after the trial. In Green, the discovery came a year after the trial was over. The discovery arose in another products liability case against the same defendant, over the same gas cans, but with different plaintiffs. The plaintiff in the second suit discovered evidence that was never produced to Rene Green in her case. Rene Green responded by filing motions alleging that defendant had systematically destroyed evidence and other discovery violations and moved the court to reopen the case. In the words of the court:
Ms. Green argues that Blitz failed to produce certain documents and also failed to preserve documents. The majority of these documents that were not produced relate to the flame arrester, or Blitz‘s interest in potentially using a flame arrester, in its gas cans. … Ms. Green contends that Blitz‘s refusal to timely produce relevant materials was done in bad faith and has resulted in manifest injustice. She asserts that—had the withheld documents been available to her at trial—the outcome of the trial would have been different and that she would have been entitled to the high-end of the high-low settlement.
As in Qualcomm, these allegations resulted in several evidentiary hearings. Federal courts take allegations of fraud against the court very seriously, as they well should. Although plaintiff’s motion to reopen the case for a new trail was denied because of the one year statute of limitations under Federal Rule of Civil Procedure 60(b)(1)-(3), she was still granted relief under the court’s inherent power to sanction discovery misconduct. You see, “a district court always has jurisdiction to impose sanctions designed to enforce its own rules, even after that court no longer has jurisdiction over the substance of the case.” Fleming v. Assoc. v. Newby & Tittle, 529 F.3d 631, 638 (5th Cir. 2008). See also Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 395-396 (1990).
Self-Collection by a Fox
In this case we have a slight variant from typical self-collection scenarios. Here the defendant designated a single employee, Larry Chrisco, to be solely responsible for searching and collecting all of defendant’s documents relevant to all of the company’s litigation concerning the fiery gas cans, including the Rene Green case. Mr. Chirsco was not a lawyer. He worked in the product development department of Blitz. In fact, he headed up the research and investigation around flame arresters. This is the very work alleged to have been negligent and to have led to the death of poor Mr. Green and others. Mr. Chrisco carried on this litigation discovery task largely by himself from 2004 until his retirement in late 2007.
It turns out that, according to the court at least, Mr. Chrisco was quite the fox. Not surprisingly Mr. Chrisco pleaded innocence by ignorance. He testified that “I am about as computer literate—illiterate as they get.” Id. at pg. 12. By virtue of his age and retirement, maybe Mr. Chrisco was telling the truth about an innocent mistake. We will never know.
What we do know is what the court tells us that:
In carrying out his duties to conduct discovery, Mr. Chrisco (i.e., Blitz) educated himself regarding the types of documents that were relevant and then talked to the departments and/or individuals he felt were likely to have those documents. Mr. Chrisco, however, acting as Blitz‘s agent for gathering discovery, did not institute a litigation-hold of documents, do any electronic word searches for emails, or talk with the IT department regarding how to search for electronic documents. …
With that background in mind, the Court discusses the particular documents that were not produced in this case. Ms. Green identifies numerous documents not produced in this case that are extremely relevant and material. … Based on Blitz‘s failure to disclose these documents, the Court finds that Blitz‘s conduct constitutes a willful violation of the Court‘s Discovery Order.
Id. at pgs. 8, 10.
The court found that the violation was willful for several reasons, including the fact that one of the key emails that Mr. Chrisco missed had the words “Flame Arrester” in the subject line of the email. This was an email from a Blitz employee to three other Blitz employees. To top it off, Mr. Chrisco was one of those three employees! Based upon the subject line heading, and the other obviously relevant contents of the email, the court found it “shocking” that it was not discovered and opined that “Any competent electronic discovery effort would have located this email.” Id. at pg. 11. I am inclined to agree.
The defense argued that under Federal Rule of Civil Procedure 26(g) they were only required to make a reasonable effort to search for and produce documents responsive to a discovery request. I agree. They were right on the law, but had some nerve to argue here that a reasonable effort had been made. They evidence showed that no effort had been made to search email. None. Apparently they only looked at papers. In today’s world, a reasonable discovery effort for a case like this clearly requires some kind of email search. The court found that the failure to produce was intentional, not reasonable error.
The court also noticed the failure of Blitz to send out a litigation hold notice for electronic documents, or otherwise make any efforts, much less reasonable efforts, to preserve electronic documents:
As discussed above, Blitz made little, if any, effort to discharge its electronic discovery obligations. But Blitz also failed to preserve its electronic documents. Far from instituting a litigation hold on relevant electronic documents, Blitz actually asked its employees to routinely delete electronic documents. From 2004 through 2007, Blitz‘s IT department head, Paul Hale, routinely sent emails to all Blitz employees instructing them and encouraging them to delete email.
Id. at pg.14.
Oops. That’s not good. But wait, there’s more:
Finally, to make matters worse, Blitz rotated its backup tapes every two weeks during this time period—at such time the old backup tapes are permanently deleted—so the deleted emails by the employees are permanently lost. Because of this systematic destruction of potentially relevant documents, it will never be known how much prejudice against the plaintiff was actually caused by Blitz‘s failure to preserve documents. The Court holds that Blitz‘s failure to preserve is sanctionable under the Court‘s inherent powers.
Id. at pg. 16.
The Sanctions Against Defendant for the Fraud Caused by Misplaced Reliance on Self-Collection
The opinion in Green begins (and ends) by imposing the following unusual sanction, a sanction that is a nightmare for any defendant involved in multiple lawsuits:
The Court orders Blitz to pay $250,000.00 in civil contempt sanctions to the plaintiff in this case. The Court additionally orders that Blitz has thirty (30) days from the date of this Memorandum Opinion & Order to furnish a copy of this Memorandum Opinion & Order to every Plaintiff in every lawsuit it has had proceeding against it, or is currently proceeding against it, for the past two years. The Court issues an additional $500,000.00 sanction that will be tolled for thirty (30) days from the date of this Memorandum Opinion & Order. At the end of that time period, if Blitz has certified with this Court that it has complied with the Court‘s order, the $500,000.00 sanction will be extinguished. Finally, for the next five years, Blitz is ordered that in every new lawsuit it participates in as a party, whether plaintiff, defendant, or in another official capacity, it must file a copy of this Memorandum Opinion and Order with its first pleading or filing in that particular court. This Court expresses no opinion as to the manner in which a particular court may use or not use such copy.
Id. at pgs. 1-2, 20-21.
You might well wonder how Judge Ward came up with the $250,000 minimum sanction amount, and how this did justice for the widow Green? Judge Ward answers that question as follows:
Given this Court‘s knowledge regarding the amount of the confidential settlement between the parties and the circumstances of that settlement, the Court finds that the settlement would have been not less than $250,000.00 higher if the plaintiff would have had the documents discussed in this Memorandum Opinion and Order.
Unlike some commentators, I think that reliance on self-collection alone is sometimes justified. It depends on the case and proportionality principles. It also depends on whether legal counsel is supervising the effort. The legal counsel in Green was nowhere to be seen. The result was predictably Charlie Sheen. Without legal counsel guard dog to growl and bark, the fox can easily sneak around in the dark. (Sorry, I had a spontaneous poetry lapse. Won’t happen again.)
In Green discovery was delegated to a lay person, a computer illiterate, about-to-retire, prime suspect of a lay person at that. Moreover, this was a wrongful death case, and one of many.
Under the facts of Green, it was obvious that a double check system was appropriate. It was not appropriate for a computer illiterate to be put in charge of e-discovery. Under these facts Judge Ward found the failure to find and produce the key emails to be an intentional violation of a court order.
In the right case, where you have no reason to suspect a fox is in your midst, and you have a legal watchdog around, there may be no need to incur the additional expense of full IT collection and attorney review. This kind of fail safe, double review method is expensive. It is a good practice to be sure, and may be required in large cases, but it should not be an automatic requirement in all cases.
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Nice job, Ralph. I wonder if that sanction will be sustained? Notification in future cases may be a hard sell to the appellate court. I expect it will be ameliorated sua sponte or modified (with the plaintiff’s purchased endorsement).
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Nice article! Very thorough and well written. I’ve posted a link to it on my blog.
[…] discussion. (Although self-validation of the chosen search method seems to be a little bit like the fox guarding the hen house problem with the self-collection of data.) I would advocate that the DESI workshop in June include […]
[…] Ralph, “Another “Fox Guarding the Hen House” Case Shows the Dangers of Self-Collection,” e-Discovery Team blog, March 20, […]
[…] folks have called this practice an example of a “fox guarding the henhouse,” in my mind it’s less that custodial bias renders self collection too risky for prime time. […]
As always, love this article. I think from para’s perspective, we have to make sure that our attorneys are on top of issuing a litigation hold and making aware of cases like this. However small your client’s annual revenue is, “SANCTION” will be enforced if proper collection is not done.
Yet again, FRCP 26(g) does provide a safe harbor where stakes are not as high as this case. When the claim of the damages is 50K, i don’t think it is reasonable to ask client to not self collect and spent 60K in collection, reviewing and production. Self collection, if followed per the industry guideline can be really helpful if the cases are small. However, decision like this will provide guidance in shaping the preservation efforts and making E-discovery effort as painless as possible. I am always for Rule 26(f) meet and confer. I wish every State enforces that in their rule book.
Thanks again for a wonderful breakdown detail analysis of the case here! As always enjoy reading your postings.
[…] In anticipation of the district court’s review, the order preemptively rejects plaintiffs’ assertion that defendant MSL’s protocol is not sufficiently transparent. In so doing, Judge Peck reasons that plaintiffs will be able to see how MSL codes emails. If they disagree with MSL’s decisions, plaintiffs will be able to seek judicial intervention. (Id. at 16.) Plaintiffs appear to argue that although this and other steps in the predictive coding protocol are transparent, the overall protocol (viewed in its entirety) is not transparent or fair. The crux of plaintiffs’ argument is that just because MSL provides a few peeks behind the curtain during this complex process, many important decisions impacting the accuracy and quality of the document production are being made unilaterally by MSL. Plaintiffs essentially conclude that such unilateral decision-making does not allow them to properly vet MSL’s methodology, which leads to a fox guarding the hen house problem. […]