ethics | e-Discovery Team

Purple Rain of Sanctions Falls on the Record Company in the “Prince Case” for their Intentional Destruction of Text Messages

March 10, 2019

Honey, I know, I know

I know times are changing

It’s time we all reach out

For something new, that means you too.

Purple Rain

1958-2016

I know, I know, it used to be good enough just to save the relevant emails and ESI on company computers. Not any more. Times are changing. Important business is now conducted by phone text and other messages. It’s time we all reach out and save something new, save the texts, save the phones. That directive applies to everyone, that means you too. Prince record company executives recently found that out the hard way in District Court in Minneapolis. Paisley Park Enters. v. Boxill, No. 0:17-cv-01212, (D. Minn., 3/5/19) (copy here: Prince_Discovery_Order).

United States Magistrate Judge Tony N. Leung sanctioned the record company defendant and its two top executives in a suit over the posthumous release of Prince’s “Deliverance” album. They were sanctioned because the plaintiff, the Prince Estate via Paisley Park, proved that the defendant executives intentionally destroyed text messages about the album. They denied bad intent and claim they did what they thought the law required, save the emails and office computer data. Defendants claimed they provided discovery from other sources of ESI, including their work computers, cooperated with a forensic data firm to ensure Plaintiffs obtained everything they sought, but, they further argue that Plaintiffs never asked to inspect their cell phones during this process. They claimed they did not know they also had to preserve their text messages.

One is reminded of the first verse to Purple Rain:

I never meant to cause you any sorrow
I never meant to cause you any pain
I only wanted to one time to see you laughing
I only wanted to see you
Laughing in the purple rain

Judge Tony Leung was not laughing, purple rain or not. He did not believe defendants’ good faith intent argument. He was no more impressed by their “times are changing,” “we didn’t know” argument than Prince was in Purple Rain. In today’s world preservation of email is not enough. If text messages are how people did business, which was the case in Paisley Park, then these messages must also be preserved. As Judge Leung put it:

In the contemporary world of communications, even leaving out the potential and reality of finding the modern-day litigation equivalent of a “smoking gun” in text messages, e-mails, and possibly other social media, the Court is baffled as to how Defendants can reasonably claim to believe that their text messages would be immune from discovery.

Perhaps what really got to the judge was that these record executives not only the deleted the texts, they wiped the phones and then they threw them away. This was all before suit was filed, but they knew full well at the time that the Estate was going to sue them for copyright violations. As Judge Leung explained (emphasis added): “An e-discovery lawyer for Plaintiffs’ law firm indicates that had Staley and Wilson not wiped and discarded their phones, it might have been possible to recover the deleted messages. (ECF No. 387, p. 2).” (Note: this is the first time I can recall this expression “e-discovery lawyer” being used in an opinion.)

Text Message Spoliation Law

Judge Leung provides a good summary of the law.

The Federal Rules of Civil Procedure require that parties take reasonable steps to preserve ESI that is relevant to litigation. Fed. R. Civ. P. 37(e). The Court may sanction a party for failure for failure to do so, provided that the lost ESI cannot be restored or replaced through additional discovery. Id. Rule 37(e) makes two types of sanctions available to the Court. Under Rule 37(e)(1), if the adverse party has suffered prejudice from the spoliation of evidence, the Court may order whatever sanctions are necessary to cure the prejudice. But under Rule 37(e)(2), if the Court finds that the party “acted with the intent to deprive another party of the information’s use in the litigation,” the Court may order more severe sanctions, including a presumption that the lost information was unfavorable to the party or an instruction to the jury that it “may or must presume the information was unfavorable to the party.” The Court may also sanction a party for failing to obey a discovery order. Fed. R. Civ. P. 37(b). Sanctions available under Rule 37(b) include an order directing that certain designated facts be taken as established for purposes of the action, payment of reasonable expenses, and civil contempt of court.

Pgs.6-7

There is no doubt that Staley and Wilson are the types of persons likely to have relevant information, given their status as principals of RMA and owners of Deliverance. Nor can there be any reasonable dispute as to the fact that their text messages were likely to contain information relevant to this litigation. In fact, Boxill and other third parties produced text messages that they sent to or received from Staley and Wilson. Neither party disputes that those text messages were relevant to this litigation. Thus, the RMA Defendants were required to take reasonable steps to preserve Staley and Wilson’s text messages.

The RMA Defendants did not do so. First, Staley and Wilson did not suspend the auto-erase function on their phones. Nor did they put in place a litigation hold to ensure that they preserved text messages. The principles of the “standard reasonableness framework” require a party to “suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents.” Steves and Sons, Inc. v. JELD-WEN, Inc., 327 F.R.D. 96, 108 (E.D. Va. 2018) (citation and internal quotation marks omitted). It takes, at most, only a few minutes to disengage the auto-delete function on a cell phone. It is apparent, based on Staley’s affidavit, that he and Wilson could have taken advantage of relatively simple options to ensure that their text messages were backed up to cloud storage. (ECF No. 395, pp. 7-9). These processes would have cost the RMA Defendants little, particularly in comparison to the importance of the issues at stake and the amount in controversy here. Failure to follow the simple steps detailed above alone is sufficient to show that Defendants acted unreasonably.

Pgs. 8-9

But that is not all the RMA Defendants did and did not do. Most troubling of all, they wiped and destroyed their phones after Deliverance and RMA had been sued, and, in the second instance for Wilson, after the Court ordered the parties to preserve all relevant electronic information, after the parties had entered into an agreement regarding the preservation and production of ESI, and after Plaintiffs had sent Defendants a letter alerting them to the fact they needed to produce their text messages. As Plaintiffs note, had Staley and Wilson not destroyed their phones, it is possible that Plaintiffs might have been able to recover the missing text messages by use of the “cloud” function or through consultation with a software expert. But the content will never be known because of Staley and Wilson’s intentional acts. The RMA Defendants’ failure to even consider whether Staley and Wilson’s phones might have discoverable information before destroying them was completely unreasonable. This is even more egregious because litigation had already commenced.

Pg. 9

It is obvious, based on text messages that other parties produced in this litigation, that Staley and Wilson used their personal cell phones to conduct the business of RMA and Deliverance. It is not Plaintiffs’ responsibility to question why RMA Defendants did not produce any text messages; in fact, it would be reasonable for Plaintiffs to assume that Defendants’ failure to do so was on account of the fact that no such text messages existed. This is because the RMA Defendants are the only ones who would know the extent that they used their personal cell phones for RMA and Deliverance business at the time they knew or should have reasonably known that litigation was not just possible, but likely, or after Plaintiffs filed suit or served their discovery requests.

Furthermore, the RMA Defendants do not get to select what evidence they want to produce, or from what sources. They must produce all responsive documents or seek relief from the court. See Fed. R. Civ. P. 26(c) (outlining process for obtaining protective order).

Pg. 12

Having concluded that the RMA Defendants did not take reasonable steps to preserve and in fact intended to destroy relevant ESI, the Court must next consider whether the lost ESI can be restored or replaced from any other source. Fed. R. Civ. P. 37(e).

Pg. 13

While it is true that Plaintiffs have obtained text messages that Boxill and other parties sent to or received from Staley and Wilson, that does not mean that all responsive text messages have been recovered or that a complete record of those conversations is available. In particular, because Wilson and Staley wiped and destroyed their phones, Plaintiffs are unable to recover text messages that the two individuals sent only to each other. Nor can they recover text messages that Staley and Wilson sent to third parties to whom Plaintiff did not send Rule 45 subpoenas (likely because they were not aware that Wilson or Staley communicated with those persons). The RMA Defendants do not dispute that text messages sent between Staley and Wilson are no longer recoverable. . . .

At most, Plaintiffs now can obtain only “scattershot texts and [e-mails],” rather than “a complete record of defendants’ written communications from defendants themselves.” First Fin. Sec., Inc. v. Lee, No. 14 cv-1843, 2016 WL 881003 *5 (D. Minn. Mar. 8, 2016). The Court therefore finds that the missing text messages cannot be replaced or restored by other sources.

Pgs. 13-14

There is no doubt that Plaintiffs are prejudiced by the loss of the text messages. Prejudice exists when spoliation prohibits a party from presenting evidence that is relevant to its underlying case. Victor Stanley, 269 F.R.D. at 532. As set forth above, in the Court’s discussion regarding their ability to replace or restore the missing information, Plaintiffs are left with an incomplete record of the communications that Defendants had with both each other and third parties. Neither the Court nor Plaintiffs can know what ESI has been lost or how significant that ESI was to this litigation. The RMA Defendants’ claim that no prejudice has occurred is “wholly unconvincing,” given that “it is impossible to determine precisely what the destroyed documents contained or how severely the unavailability of these documents might have prejudiced [Plaintiffs’] ability to prove the claims set forth in [their] Complaint.” Telectron, Inc. v. Overhead Door Corp., 116 F.R.D. 107, 110 (S.D. Fl. 1987); see also Multifeeder Tech., Inc. v. British Confectionary Co. Ltd, No. 09-cv-1090, 2012 WL 4128385 *23 (D. Minn. Apr. 26, 2012) (finding prejudice because Court will never know what ESI was destroyed and because it was undisputed that destroying parties had access to relevant information), report and recommendation adopted in part and rejected in part by 2012 WL 4135848 (D. Minn. Sept. 18, 2012). Plaintiffs are now forced to go to already existing discovery and attempt to piece together what information might have been contained in those messages, thereby increasing their costs and expenses. Sanctions are therefore appropriate under Rule 37(e)(1).

Sanctions are also appropriate under Rule 37(e)(2) because the Court finds that the RMA Defendants acted with the intent to deprive Plaintiffs of the evidence. “Intent rarely is proved by direct evidence, and a district court has substantial leeway to determine intent through consideration of circumstantial evidence, witness credibility, motives of the witnesses in a particular case, and other factors.” Morris v. Union Pacific R.R., 373 F.3d 896, 901 (8th Cir. 2004). There need not be a “smoking gun” to prove intent. Auer v. City of Minot, 896 F.3d 854, 858 (8th Cir. 2018). But there must be evidence of “a serious and specific sort of culpability” regarding the loss of the relevant ESI. Id.

Pgs. 15-16

The Court can draw only one conclusion from this set of circumstances: that they acted with the intent to deprive Plaintiffs from using this information. Rule 37(e)(2) sanctions are particularly appropriate as to Wilson, RMA, and Deliverance for this reason as well.

Pg. 17

The Court believes that Plaintiffs’ request for an order presuming the evidence destroyed was unfavorable to the RMA Defendants and/or for an adverse inference instruction may well be justified. But given the fact that discovery is still on-going, the record is not yet closed, and the case is still some time from trial, the Court believes it more appropriate to defer consideration of those sanctions to a later date, closer to trial. See Monarch Fire Protection Dist. v. Freedom Consulting & Auditing Servs., Inc., 644 F.3d 633, 639 (8th Cir. 2011) (holding that it is not an abuse of discretion to defer sanction considerations until trial). At that point, the trial judge will have the benefit of the entire record and supplemental briefing from the parties regarding the parameters of any such instruction or presumption.

The Court will, however, order the RMA Defendants to pay monetary sanctions pursuant to Rules 37(b), and 37(e) and the Court’s pretrial scheduling orders.

Pgs. 18-19

The Court will therefore order, pursuant to Rules 37(b)(2)(C), 37(e)(1), and 37(e)(2) and the Court’s pretrial scheduling orders, the RMA Defendants to pay reasonable expenses, including attorney’s fees and costs, that Plaintiffs incurred as a result of the RMA Defendants’ misconduct. The Court will order Plaintiffs to file a submission with the Court detailing such expenses and allow the RMA Defendants the opportunity to respond to that submission. In addition, pursuant to Rule 37(e)(2) and the Court’s pretrial scheduling order, the Court will also order the RMA Defendants to pay into the Court a fine of $10,000. fn3 This amount is due within 90 days of the date of this Order.

Pg. 20

Let’s close with the original music of Prince.

5 Comments | Evidence, Lawyers Duties, New Rules, Spoliation/Sanctions, Technology | Tagged: best practices, discovery, document review, ethics, technology | Permalink
Posted by Ralph Losey

It’s Mueller Time! The Emergence of a New Legal Service Based on Artificial Intelligence

January 29, 2019

It’s Mueller Time! I predict we will be hearing this call around the world for decades, including boardrooms. Organizations will decide to investigate themselves on sensitive issues before the government does, or before someone sues them and triggers formal discovery. Not always, but sometimes, they will do so by appointing their own independent counsel to check on concerns. The Boards of tomorrow will not look the other way. If Robert Muller himself later showed up at their door, they would be ready. They would thank their G.C. that they had already cleaned house.

Most companies who decide it is Mueller Time, will probably not investigate themselves in the traditional “full calorie” Robert Muller way, as good as that is. Instead, they will order a less expensive, AI based investigation, a Mueller Lite. The “full calorie” traditional legal investigation is very expensive, slow and leaky. It involves many people and linear document review. The AI Assisted alternative, the Mueller Lite, will be more attractive because of its lower cost. It will still be an independent investigation, but will rely primarily on internal data and artificial intelligence, not expensive attorneys.

I call this E-Vestigations, for electronic investigations. It is a new type of legal service made possible by a specialized type of AI called “Predictive Coding” and newly perfected Hybrid Multimodal methods of machine training.

Mueller Lite E-Vestigations Save Money

Robert Mueller investigations typically cost millions and involves large teams of expensive professionals. AI Assisted investigations are cheap by comparison. That is because they emphasize company data and AI search of the data, mostly the communications, and need so few people to carry out. This new kind of investigation allows a company to quietly look into and take care of its own problems. The cost savings from litigation avoidance, and bad publicity, can be compelling. Plus it is the right thing to do..

E-Vestigations will typically be a quarter the cost of a traditional Mueller style, paper investigations. It may even be far less than that. Project fees depend on the data itself (volume and “messiness”) and the “information need” of the client (simple or complex). The competitive pricing of the new service is one reason I predict it will explode in popularity. This kind of dramatic savings is possible because most of the time consuming relevance sorting and document ranking work is delegated to the AI.

The computer “reads” or reviews at nearly the speed of light and is 100% consistent. But it has no knowledge on its own. An idiot savant. The AI cannot do anything without its human handlers and trainers. It is basically a learning machine designed to sort large collections of texts into binary sets, typically relevant or irrelevant.

The human investigators read much slower and sometimes make mistakes (plus they like to get compensated), but they are absolutely indispensable. Someday the team of humans may get even smaller, but we are already down to around seven or fewer people per investigation. Compare that to the hundreds involved in a traditional Muller style document review.

Proactive “Peace of Mind” Investigations

This new legal service allows concerned management to proactively investigate upon the first indications of possible wrong-doing. It allows you to have greater assurance that you really know what is going on in your organization. Management or the Board then retains an independent team of legal experts to conduct the quick E-Vestigation. The team provides subject matter expertise on the suspected problem and uses active machine learning to quickly search and analyze the data. They search for preliminary indications of what happened, if anything. This kind of search is ideal for sensitive legal inquiries. It gives management the information needed without breaking the bank or publicizing the results.

This New Legal Service Is Built Around AI

E-Vestigations are a pre-litigation legal service that relies heavily on artificial intelligence, but not entirely. Investigations like this are very complex. They are nowhere near a fully automated process, and as mentioned the AI is really just a learning machine that knows nothing except how to learn document relevance. The service still needs legal experts, but a much smaller team

AI assisted investigations such as E-Vestigations have five compelling positive traits:

Cost
Speed
Stealthiness
Confidentiality
Accuracy.

This article introduces the new service, discusses these five positive traits and provides background for my prediction that many organizations will order AI assisted investigations in the coming years. In fact, due to the disappearing trial, I predict that E-Vestigations will someday take the lead from Litigation in many law firms. This prediction of the future, like most, requires a preliminary journey into the past, to see the longer causal line of events. That comes next, but feel to skip the next three sections until you come to the heading, What is an E-Vestigation?

King Litigation Is Dead

The glory days of litigation are over. All trial lawyers who, like me, have lived through the last forty years of legal practice, have seen it change dramatically. Litigation has moved from a trial and discovery practice, where we saw each other daily in court, to a discovery, motion and mediation practice where we communicate by email and occasional calls.

Although some “trial dogs” will not admit it, we all know that the role of trials has greatly diminished in modern practice. Everything settles. Ninety-nine percent (99%) of federal court civil cases settle without trial. Although my current firm is a large specialty practice, and so is an exception, in most law firms trials are very rare. A so-called “Trial Practice” of a major firm could go years without having an actual trial. I have seen it happen in many law firms. Good lawyers for sure, but they do not really “do trials,” they do trial preparation.

For example, when I started practicing law in 1980 “dispute resolution” was king in most law firms. It was called the “Litigation Department” and usually attracted the top legal talent. It brought in strong revenue and big clients. Every case in the top firms was either a “Bet the Farm” type, or a little case for kiddie lawyer training, we had no form-practice. Friedmann & Brown, “Bet the Farm” Versus “Law Factory”: Which One Works? (Geeks and Law, 2011).

The opposite, “Commodity Litigation,” was rare; typically just something for some divorce lawyers, PI lawyers, criminal lawyers and bankruptcy lawyers. These were not the desired specialties in the eighties, to put it mildly. Factory like practices like that did not pay that well (honest ones anyway) and were boring to most graduates of decent law schools. This has not changed much until recently, when AI has made certain Commodity practices far more interesting and desirable. See Joshua Kubicki, The Emerging Competitive Frontier in Biglaw is Practice Venturing (Medium, 1/24/19).

Aside from the less desirable Commodity practice law firms, most litigators in the eighties would routinely take a case to trial. Fish or Cut Bait was a popular saying. Back then Mediation was virtually unknown. Although a majority of cases did eventually settle, a large minority did not. That meant physically going to court, wearing suits and ties every day, and verbal sparing. Lots of arguments and talk about evidence. Sometimes it meant some bullying and physical pushing too, if truth be told. It was a rough and tumble legal world in the eighties, made up in many parts of the U.S. almost entirely of white men. Many were smokers, including the all-white bench.

Ah, the memories. Some of the Litigation attorneys were real jerks, to put it mildly. But only a few were suspected crooked and could not be trusted. Most were honest and could be. We policed our own and word got around about a bad apple pretty fast. Their careers in town were then soon over, one way or the other. Many would just move away or, if they had roots, become businessmen. There were trials a plenty in both the criminal and civil sides.The trials could be dramatic spectacles. The big cases were intense.

Emergence of Mediation

But the times were a changing. In the nineties and first decade of the 21st Century, trials quickly disappeared. Instead, Mediation started to take over. I know, I was in the first group of lawyers ever to be certified as a Mediator of High Technology disputes in 1989. All types of cases began to settle earlier and with less preparation. I have seen cases settle at Mediation where none of the attorneys knew the facts. They just knew what their clients told them. Even more often, only one side was prepared a knew the facts. The other was just “shooting from the hip.”

At trial the unprepared were quickly demolished by the facts, the evidence. At Mediation you can get away with it. The evidence is often just one side’s contention. Why bother to learn the record when you can just BS your way through a mediation? The truth is what I say it is, nothing more. There is no cross-exam. Mediation is a “liars heaven,” although a good mediator can plow through that.

What happened to all the Trial Lawyers you might ask? Many became Mediators, including several of my good friends. A few started specializing in Mediation advocacy, where psychodrama and math are king (typically division). Mediation has become the everyday “Commodity” practice and trials are now the “Bet the Farm” rarity.

With less than one-percent of federal cases going to trial, it is a complete misnomer to keep calling ourselves Trial Lawyers. I know I have stopped calling myself that. Like it or not, that is reality. Our current system is designed to settle. It has become a relativistic opinion fest. It is not designed to determine final, binding objective truth. It is not designed to make findings of fact. It is instead designed to mediate ever more ingenious ways to split the baby. We no longer focus on the evidence, on the objective truth of what happened. We have lost our way.

Justice without Truth is Destabilizing

Justice without Truth is a mockery of Justice, a Post-Modern mockery at that, one where everything is relative. This is called Subjectivism, where one person’s truth is as good as another’s. All is opinion.

This relativistic kind of thinking was, and still is in most Universities, the dominant belief among academics. Truth is supposed to be relative and subjective, not objective, unless it happens to be science. Hard science is supposed to have a monopoly on objectivity. Unfortunately, this relativistic way of thinking has had some unintended consequences. It has led to the kind of political instability that we see in the U.S. today. That is the basic insight of a new book by Pulitzer Prize winner, Michiko Kakutani. The Death of Truth: Notes on Falsehood in the Age of Trump (Penguin, 2018). Also see Hanlin, Postmodernism didn’t cause Trump. It explains him. (Washington Post, 9/2/18).

Truth is truth. It is not just what the company with the biggest wallet says it is. It is not an opinion. Objective truth, the facts based on hard evidence, is real. It is not just an opinion. This video ad below by CNN was cited by Kakutani in her Death of Truth. It makes the case for objectivity in a simple, common sense manner. The political overtones are obvious.

There is a place for the insights of Post-Modern Subjectivism, especially as it concerns religion. But for now the objective-subjective pendulum has swung too far into the subjective. The pause between directions is over and it is starting to swing back. Facts and truth are becoming important again. This point in legal history will, I predict, be marked by the Mueller investigation. Evidence is once again starting to sing in our justice system. It is singing the body electric. The era of E-Vestigations has begun!

What are E-Vestigations?

E-Vestigations are confidential, internal investigations that focus on search of client data and metadata. They uses Artificial Intelligence to search and retrieve information relative to the client’s requested investigation, their information need. We use an AI machine training method that we call Hybrid Multimodal Predictive Coding 4.0. The basic search method is explained in the open-sourced TAR Course, but the Course does not detail how the method can be used in this kind of investigation.

E-Vestigation is done outside of Litigation and court involvement, usually to try to anticipate and avoid Litigation. Are the rumors true, or are the allegations just a bogus attempt to extort a settlement? E-Vestigations are by nature private, confidential investigations, not responses to formal discovery. AI Assisted investigations rely primarily on what the data says, not the rumors and suspicions, or even what some people say. The analysis of vast volumes of ESI is possible, even with millions of files, because e-Vestigations use Artificial Intelligence, both passive and active machine learning. Otherwise, the search of large volumes of ESI takes too long and is too prone to inaccuracies. That is the main reason this approach is far less expensive than traditional “full calorie” Muller type investigations.

The goal of E-Vestigation is to find quick answers based on the record. Interviews may not be required in many investigations and when they are, they are quick and, to the interviewee, mysterious. The answers to the information needs of a client are sometimes easily found. Sometimes you may just find the record is silent as to the issue at hand, but that silence itself often speaks volumes.

The findings and report made at the end of the E-Vestigation may clear up suspicion, or it may trigger a deeper, more detailed investigation. Sometimes the communications and other information found may require an immediate, more drastic response. One way or another, knowing provides the client with legitimate peace of mind.

The electronic evidence is most cases will be so overwhelming (we know what you said, to whom and when) that testimony will be superfluous, a formality. (We have your communications, we know what you did, we just need you to clear up a few details and help us understand how it ties into guys further up the power chain. That help will earn you a lenient plea deal.) This is what is happening right now, January 2019, with the investigation of Robert Mueller.

Defendants in criminal cases will still plea out, but based on the facts, on truth, not threats. Defendants in civil cases will do the same. So will the plaintiff in civil cases who makes unsubstantiated allegations. Facts and truth protect the innocent. Most of that information will be uncovered in computer systems. In the right hands, E-Vestigations can reveal all. It is a proactive alternative to Litigation with expensive settlements. The AI data review features of E-Vestigations make it far less expensive than a Muller investigations. Is it Mueller Time for your organization?

Robert Mueller never need ask a question of a witness to which he does not already know the answer based on the what the record said. The only real question is whether the witness will further compound their problems by lying. They often do. I have seen that several times in depositions of parties in civil cases. It is sheer joy and satisfaction for the questioner to watch the ethically challenged party sink into the questioner’s hidden traps. The “exaggerating witness” will often smile, just slightly, thinking they have you fooled, just like their own attorney. You smile back knowing their lies are now of record and they have just pounded another nail into their coffin.

E-Vestigations may lead to confrontation, even arrest, if the investigation confirms suspicions. In civil matters it may lead to employee discharge or accusations against a competitor. It may lead to an immediate out-of-court settlement. In criminal matters it may lead to indictment and an informed plea and sentencing. It may also lead to Litigation in civil matters with formal, more comprehensive discovery, but at least the E-Vestigating party will have a big head start. They will know the facts. They will know what specific information to ask for from the opposing side.

Eventually, civil suits will not be filed that often, except to memorialize a party’s agreement, such as a consent to a judgment. It will, instead, be a world where information needs are met in a timely manner and Litigation is thereby avoided. A world where, if management needs to know something, such as whether so and so is a sexual predator, they can find out, fast. A world where AI in the hands of a skilled legal team can mine internal data-banks, such as very large collections of employee emails and texts, and find hidden patterns. It may find what was suspected or may lead to surprise discoveries.

The secret mining of data, otherwise known as “reading other people’s emails without their knowledge” may seem like an egregious breach of privacy, but it is not, at least not in the U.S. under the computer use policies of most groups. Employees typically consent to this search as a condition of employment or computer use. Usually the employer owns all of the equipment searched. The employee has no ownership, nor privacy rights in the business related communications of the employer.

The use of AI assistants in investigations limits the exposure of irrelevant information to humans. First, only a few people are involved in the investigation at all because the AI does the heavy lifting. Second, the human reviewers are outside of the organization. Third, the AI does almost all of the document review. Only the AI reads all of the communications, not the lawyers. The humans look at far less than one percent of the data searched in most projects. They spend most of their time in study of the documents the AI has already identified as likely relevant.

The approach of limited investigations, of going in and out of user data only to search in separate, discreet investigations, provides maximum confidentiality to the users. The alternative, which some organizations have already adopted, is constant surveillance by AI of all communications. You can predict future behavior that way, to a point and within statistical limitations of accuracy. The police in some cities are already using constant AI surveillance to predict crimes and allocate resources accordingly.

I find this kind of constant monitoring to be distasteful. For me, it is too Big Brother and oppressive to have AI looking at my every email. It stifles creativity and, I imagine, if this was in place, would make me overly cautious in my communications. Plus, I would be very concerned about software error. If some baby AI is always on, always looking for suspicious patterns, it could make mistakes. The programming of the software almost certainly contains a number of hidden biases of the programmers, typically young white dudes.

The one-by-one investigation approach advocated here provides for more privacy protection. With E-Vestigations the surveillance is focused and time limited. It is not general and ongoing.

Five Virtues of E-Vestigations

Although I am not going to go into the proprietary details here of our E-Vestigations service (contact me through my law firm if you want to know more), I do want to share what I think are the five most important traits of our AI (robotic) assisted reviews: economics, confidentiality, stealth, speed and accuracy.

Confidentiality:

Complete Secrecy.
Artificial Intelligence means fewer people are required.
Employee Privacy Rights Respected.
Data need never leave corporate premises using specialized tools from our vendor.
Attorney-Client Privilege & Work Product protected.

Stealthiness:

Under the Radar Investigation.
Only some in client IT need know.
Sensitive projects. Discreet.
Stealth forensic copy and review of employee data.
Attorneys review off-site, unseen, via encrypted online connection.
Private interviews; only where appropriate.

Speed:

Techniques designed for quick results, early assessments.
Informal, high-level investigations. Not Litigation Discovery.
High Speed Document Review with AI help.
Example: Study of Clinton’s email server (62,320 files, 30,490 disclosed – 55,000 pgs.) is, at most, a one-week project with a first report after one day.

Accuracy:

Objective Findings and Analysis.
Independent Position.
Specialized Expertise.
Answers provided with probability range limitations.
Known Unknowns (Rumsfeld).

Clients are impressed with the cost of E-Vestigations, as compared to traditional investigations. That is important, of course, but the speed of the work is what impresses many. We produce results, use a flat fee to get there, and do so very FAST.

Certainly we can move much faster than the FBI reviewing email using its traditional methods of expert linear review. The Clinton email investigations took forever by our standards. Yet, Clinton’s email server had only 62,320 files, of which 30,490 were disclosed (around 55,000 pages.) This is, at most, a one-week E-Vestigations project with a first report after one day. Our projects are much larger. They involve review of hundreds of thousands of emails, or hundreds of millions. It does not make a big difference in cost because the AI, who works for free, is doing the heavy lifting of actual studying of all this text.

Most federal agencies, including the FBI, do not have the software, the search knowledge, nor attorney skills for this new type of AI assisted investigation. They also do not have the budget to acquire good AI for assist. Take a look at this selection from the official FBI collection of Clinton email and note that the FBI and US Attorneys office in Alexandra Virginia were communicating by fax in September 2015!

State and federal government agencies are not properly funded and cannot compete with private industry compensation. The NSA may well have an A-Team for advanced search, but not the other agencies. As we know, the NSA has their hands full just trying to keep track of the Russians and other enemies interfering with our elections, not to mention the criminals and terrorists.

Unintended Consequence of Mediation Was to Insert Subjectivism into the Law

As discussed, the rise and commoditization of Mediation over the last twenty years has had unintended consequences. The move from the courtroom to the mediator’s office in turn caused the Law to move from objective to subjective opinion. Discussion of the consequences of mediation, and the subjectivist attitude it brings, complicates my analysis of the death of Litigation, but is necessary. Litigation did not turn into private investigation work. One did not flow into another. Litigation is not changing directly into private Investigations, AI assisted or not. Mediation, and its unexpected consequences, is the intervening stage.

1. Litigation → 2. Mediation → 3. AI Assisted Investigations

Mediation brought down Litigation, at least the all important Trial part of Litigation, not AI or private investigations. There is never a judge making rulings at a mediation. There are only attorneys and assertions of what. Somebody must be lying, but with Mediation you never know who. Lawyers found they could settle cases without all that. They did not need the judge at all. At mediation there are no findings of fact, no rulings of law, just droll agreements as to who will pay how much to whom.

The next stage I predict of AI Assisted Investigations is filling a gap caused by the unintended consequence of Mediation. Mediation was never intended to spawn AI Assisted Investigations, no such thing even existed. It was not possible. We did not have the technology to do something like this. The forces driving the advent of AI Assisted Investigations, which I call E-Vestigations, have little to do with Mediation directly, but are instead the result of rapid advances in technology.

Mediation was intended to encourage settlement and reduce expensive trials. It has been wildly successful at that; exceeded all expectations. But this surprise success has also led to unexpected negative consequences. It has led to a new subjectivistic attitude in Litigation. It has led to the decline of evidence and an over-relativistic attitude where Truth was dethroned.

Most of my Mediator friends strongly disagree, but I have never heard a compelling argument to the contrary. The death of the trial is a stunning development. But mediation has had another impact. One that I have not seen discussed previously. It has not only killed trials, it has killed the whole notion of objective truth. It has led to a mediation mind-set where the “merits” are just a matter of opinion. Where cost of defense and the time value of money are the main items of discussion.

That foreseeable defect has led to the unforeseeable development of an AI Assisted alternative to Litigation. It is led to E-Vestigations. AI can now be used to help lawyers investigate and quickly find out the true facts of a situation.

Many lawyers who litigate today do not care what “really happened.” Very post-modern of them, but come on? A few lawyers just blindly believe whatever damned fool thing their client tells them. Most just say we will never know the absolute truth anyway, so let us just try our best to resolve the dispute and do what’s fair without any test of the evidence. They try to do justice with just a passing nod to the evidence, to the truth of what happened. I am not a fan. It goes against all of my core teachings as a young commercial litigation attorney who prepared and tried cases. It goes against my core values and belief. My opinion is that it is not all just opinion, that there is truth.

I object to that mediation, relativistic approach. After a life in the Law chasing smoking guns and taking depositions, I know for a fact that witnesses lie, that their memories are unreliable, all too human. But I also know that the writings made by and to these same witness often expose the lies, or, more charitably put, expose the errors in human memory. Fraudsters are human and almost always make mistakes. It is an investigator’s job to check the record to find the slip-ups in the con. (I dread the day when I have to try to trace a AI fraudster!)

I have been chasing and exposing con-men most of my adult life. I defended a few too. In my experience the truth has a way of finding its way out.

This is not an idealistic dream in today’s world of information floods. There is so much information, the real difficulty is in finding the important bits, the smoking guns, the needles. The evidence is usually there, but not yet found. The real challenge today is not in gathering the evidence, it is in searching for the key documents, finding the signal in the noise.

Conclusion

Objective accounts of what happened in the past are not only possible, they are probable in today’s Big Data world. Your Alexa or Google speakers may have part of the record. So too may your iWatch or Fitbit. Soon your refrigerator will too. Data is everywhere. Privacy is often an illusion. (Sigh.) The opportunity of liars and other scoundrels to “get away with it” and fool people is growing smaller every day. Fortunately, if lawyers can just learn a few new evidence search skills, they can use AI to help them find the information they need.

Juries and judges, for the most part, believe in objective truth. They are quite capable of sorting through competing versions and getting at the truth. Good judges and lawyers (and jurors) can make sure that happens.

As mentioned, many academics and sophisticates believe otherwise, that there is no such a thing as objective truth. They believe instead in Relativism. They are wrong.

As Michiko Kakutani said in her book, The Death of Truth:

The postmodernist argument that all truths are partial (and a function of one’s perspective) led to the related argument that there are many legitimate ways to understand or represent an event. . . .

Without commonly agreed-upon facts — not Republican facts and Democratic facts; not the alternative facts of today’s silo-world — there can be no rational debate over policies, no substantive means of evaluating candidates for political office, and no way to hold elected officials accountable to the people. Without truth, democracy is hobbled. The founders recognized this, and those seeking democracy’s survival must recognize it today.

It is possible to find the truth, objective truth. All is not just opinion and allegations. Accurate forensic reconstruction is possible today in ways that we could never have imagined before. So is AI assisted search. The record of what is happening grows larger every day. That record written electronically at the time of the events in question is far more reliable than our memories. We can find the truth, but for that need to look primarily to the documents, not the testimony. That is not new. That is wisdom upon which almost all trial lawyers agree.

The truth is attainable, but requires dedication and skilled efforts by everyone on a legal team to find it. It requires knowledge of course, and a proven method, but also impartiality, discipline, intelligence and a sense of empathy. It requires experience with what the AI can do, and just as important, what it cannot do. It requires common sense. Lawyers have that. Jurors have that.

Surely only a weak-minded minority are fooled by today’s televised liars. Most competent trial lawyers could persuade a sequestered jury to convict them. And convict they will, but that still will not cause of rebirth of Litigation. Its’ glory days are over. So too is its killer, Mediation, although its death will take longer (Mediation may not even have peaked yet).

Evidence speaks louder than any skilled mediator. Let the truth be told. Let the chips fall where they may. King Litigation is dead. Long live the new King, confidential, internal AI assisted E-Vestigations.

3 Comments | Evidence, informaton, knowledge, Lawyers Duties, Metadata, New Rules, Related Legal Webs, Review, Search, Spoliation/Sanctions, Technology, VENDORS, wisdom | Tagged: ai, computer assisted review, discovery, document review, ethics, evidence, legal profession, machine learning, Mueller, predictive coding, search, tar, too much information | Permalink
Posted by Ralph Losey

The Jimi Hendrix Experience: Sanctions For Destruction

December 2, 2018

James Marshall “Jimi” Hendrix, whom Rolling Stone ranked the greatest guitarist of all time, died intestate in 1970 at twenty-seven. His heirs have been embroiled in litigation ever since. They have recently entered the fiery realm of e-discovery and sanctions. Experience Hendrix, LLC v. Pitsicalis, No. 17-cv-1927 (PAE) (S.D.N.Y., 11/27/18). The opinion by District Court Judge Paul A. Engelmayer is interesting in its own right, but when you add the Hendrix name and family feud, you have a truly memorable order. After all, we are talking about the artist who created “Purple Haze,” “Foxy Lady,” “The Star-Spangled Banner,” “Hey Joe” and my personal favorite, his rendition of Bob Dylan’s “All Along the Watchtower”.

Case Background: The Hendrix Family Feud

The latest suit involves the usual serial litigants. On one side is Jimi’s step-sister, Janie Hendrix (shown right). She is, as Jimi would have said, a “Foxy Lady”. Janie assumed control of the Estate from Jimi’s natural father, Al Hendrix, when he died in 2002. On the other side is Jimi’s brother, Leon Hendrix and Leon’s business partner, Andrew Pitsicalis. Kerzner, Hendrix Sues Serial Infringer Andrew Pitsicalis (American Blues Scene, 3/20/17). There can be big money in the Hendrix name, the top guitarist of all time. I for one still get choked up when I hear his rendition of “The Star-Spangled Banner”:

Jimi’s father, Al Hendrix, won bitterly fought estate litigation in the seventies, but the trademark litigation has never stopped. Multiple injunctions are in place under the corporate name, Experience Hendrix, LLC, but the infringements just keep coming. Companies keep popping up to sell Jimi Hendrix branded goods. Andrew Pitsicalis and Leon Hendrix are frequently involved. Their latest attempts to profit from the Jimi brand include marijuana related products (apparently “Purple Haze” has long been a well know strain of cannabis. See: Legal Battle Ensues Over Jimi Hendrix Usage Rights (High Times, 3/29/17); Jimi Hendrix’s heirs wage court battle over branded cannabis, other products (Cannifornan, 3/22/17).

I am reminded of the closing line of the Hendrix classic, Are You Experienced:

Ah! But Are You Experienced?
Have you ever been experienced?

Not necessarily stoned, but beautiful.

Jimi’s brother, Leon Hendrix (shown right), is an artist and musician himself with his own following. Some think he was treated unfairly by his Dad and Step-Sister. For a variety of reasons, especially I suspect the impact of Pitsicalis, the CEO of “Purple Haze Properties” and Leon’s business partner, there is still bad blood. Chris Fry, Jimi Hendrix’s Brother Fires Back Against Estate (Courthouse News, 3/28/17).

This kind of family feud mentality is not uncommon in litigation, especially in cases involving the intentional destruction of evidence. I am reminded of a Hendrix line from Voodoo Child:

Well, the night I was born. Lord I swear the moon turned a fire red. The night I was born I swear the moon turned a fire red. Well my poor mother cried out “lord, the gypsy was right!” And I seen her, fell down right dead. Have mercy.

Spoliation sanctions generally arise from a haze, just not a stoned purple haze, more like an angry moon turned a fire red haze. Even a seasoned District Court Judge in the SDNY, Paul Engelmayer, was “dismayed” by the conduct of Pitsicalis and Leon Hendrix. Well, what did you expect in matters involving the Estate of a Voodoo Child musical genius? The best guitarist that ever lived?

Judge Engelmayer’s Sanction Order

The scholarly and well-written opinion by District Court Judge Paul A. Engelmayer (shown right) begins by observing:

As the docket in this matter reflects, the Court has been called upon dismayingly often to act when presented with evidence of the PHP defendants’ persistent non-compliance with basic discovery obligations. Plaintiffs now move this Court to sanction these defendants for (1) spoliation of evidence and, more generally, (2) “consistent, pervasive[,] and relentless discovery abuses by [d]efendants and their counsel, Thomas Osinski.” Dkt. 245. Plaintiffs request, inter alia, a preliminary injunction, an order of attachment, an adverse inference instruction at trial, and terminating sanctions. See Dkts. 237, 244. For the reasons below, the Court grants the motion for an adverse inference instruction and directs the PHP defendants to pay the reasonable fees and costs incurred by plaintiffs in bringing this motion.

Experience Hendrix, LLC v. Pitsicalis, No. 17-cv-1927 (PAE) (S.D.N.Y., 11/27/18). Expressing “dismay” is about as emotional as Judge Engelmayer gets in writing an opinion, even one sanctioning a party for destroying evidence and disobeying court orders.

The PHP defendants mentioned are Leon Hendrix, Andrew Pitsicalis and their corporation, Purple Haze Properties (PHP). As you can see from the first quote, the attorney who represents them, Thomas Osinski, was also accused of discovery abuse. That often happens in joker and the thief type cases like this.

A good sanctions case will always have a “parade of horribles” consisting of a list of things the spoliating party supposedly did wrong. Hendrix is no exception. That is how the severe sanctions are justified. It would take too long to list all of the abuses justifying sanctions in Hendrix, but here are the four main ones:

PHP Defendants’ Failure to Produce Forensic Images as Ordered. Apparent intentional disobedience of court orders to make forensic copies of and produce certain drives, even after daily fines are imposed for late production. One of the excuses PHP offered was especially humorous, especially considering the NYC venue, but they actually claimed “that they had had difficulty hiring an expert technician who could image the hard drives.” Yeah, it’s real hard. Need I say more about Osinski’s veracity? When they finally did produce some, but not all of the forensic images, they were not “forensic” images. They were just copies of all active files (a “ghost” copy) with no forensic copy of the slack space. That is what a forensic copy means. It allows for search and examination of deleted files, which was the whole point of the court order.
PHP Defendants’ Use of Anti-Forensic Software. Software allowing for the complete wiping of files was found installed on several of the computer images that were produced. In some there was evidence the software was installed immediately after a court order was entered requiring production. In these the plaintiff’s forensic expert could also show that the software, CleanMyMac, was actually used to wipe files and when, although it was not possible to know what files were destroyed. The moving party (Janie Hendrix and her company Experience Hendrix, L.L.C.) proved the use was knowing when their expert, John T. Myers, showed how the software was configured to have a pop-out and warn the user to confirm complete elimination of the file (it cannot be recovered after that). The defendants testified that they did not recall ever using it. Sure. Spoliate evidence and then cover-up, or try to.
Andrew Pitsicalis Deleted “Jimi”-related Text Messages from his iPhone. Plaintiff’s forensic expert was able to prove that more than 500 text messages had been deleted from Pitsicalis cell phone after the duty to preserve had arisen (suit was filed). Moreover, they were able to recover nine text messages pertaining to Jimi. As Judge Engelmayer explained: “Fortuitously, Myers was able to recover the deleted text messages from the imaged phone because those communications had been stored not in the applications used to send and receive them (e.g., iMessage), but in databases where files exist until overwritten or otherwise purged.”
Key Computer at First Hidden, then After Discovery in Photograph, Goes South to Florida and is Never Examined. This one sounds like a bad game of Where’s Waldo. A “Seventh Computer” was found, one never reported by PHP, by plaintiff’s study of photos on PHP’s Facebook page. Very clever. One picture on FB showed Andrew Pitsicalis, sitting in his office, in immediate proximity to a mystery desktop computer. When asked about it under oath PHP’s fine attorney, Osinski, swore that he thought it was just a dummy Apple monitor on the office desk, not a computer. He said he did not know that the monitor, and key board next to it, were a real, functional computer, an iMac. What? Did he think these were IKEA props in a display room? They were sitting on his client’s desk in a Facebook photo taken after suit was filed. But wait, there is more, Osinski went on to swear that the computer had moved to Florida. As Judge Engelmayer explained:

“Osinski testified that his present understanding is that the desktop computer belonged to an individual named Hector David, Jr. who has moved to Florida and who, Osinski assumes, took the computer with him. Osinski, however, did not have personal knowledge of this, or of the contents of the desktop in Andrew Pitsicalis’ office. … Andrew Pitsicalis, for his part, denied owning the computer and testified that David was not employed by PHP.”

Apparently no one has been able to locate this mysterious Hector David or know where he took the iMac computer sitting on Pitsicalis desk.

Legal Standards of Spoliation in Hendrix

Judge Engelmayer’s opinion in Hendrix examines two legal standards, Rule 37 and Spoliation. He begins the discussion with the duty to preserve, the threshold issue in spoliation:

The first issue is whether the PHP defendants had an obligation to preserve the categories of evidence at issue. A party has an obligation to preserve evidence when it “has notice that the evidence is relevant to litigation . . . [or] should have known that the evidence may be relevant to future litigation.” Kronisch v. United States, 150 F.3d 112 , 126 (2d Cir. 1998) (internal citations omitted).

That standard is easily met here.

He then goes on to discuss whether that duty as breached, another no-brainer based on the impressive parade of horribles in this case:

The Court further finds—and the evidence to this effect is overwhelming—that the PHP defendants repeatedly breached this duty. The breaches fall in three categories: (1) the use of cleaning software on covered computing devices, (2) the failure to disclose the existence of a seventh computing device containing potentially relevant documents, and (3) the deletion of relevant text messages.

Judge Engelmayer’ then discusses the key issue of intent, the mens rea to spoliate.

Much of the PHP defendants’ spoliation of evidence, the Court finds, was intentional. …

The Court finds that, by installing anti-cleaning software on his own computer and causing it to be installed on Schmitt’s in the face of an unambiguous and known duty to preserve potentially relevant evidence, Pitsicalis intentionally caused the destruction of such evidence.

The defenses proffered by the PHP defendants are unavailing. That Schmitt personally may not have acted with the intent to deleted responsive files is beside the point. The relevant mens rea here is that of Andrew Pitsicalis, who owned PHP, for which Schmitt worked as an independent contractor, and who, despite being a repeat litigant amply on notice of his duty to preserve potentially relevant evidence, urged Schmitt to run this software to delete files. Tr. 125, 133. Also unhelpful is Pitsicalis’ [*13] explanation that, at some unspecified point, he went on “Google to search for ‘top anti-forensic software’ and went through the first 10 pages of search” without finding anything for CleanMyMac. Andrew Pitsicalis Decl. at 2-3. Regardless what Pitsicalis’ internet research may have shown, the evidence adduced at the hearing clearly established both that the CleanMyMac software had the capacity to cause the deletion (and shredding) of files, and that Pitsicalis knew this, not least because the software’s causation of such deletion was made explicit to the user each time. Pitsicalis does not offer any reason for installing and using this software on his computer, let alone for having done so without first creating an image of the full contents of the computer that would have assured preservation of the computer’s contents.

Andrew Pitsicalis’ deletion of relevant text messages was also clearly intentional. By his admission, he personally and deliberately deleted, among other text messages, a series of texts concerning the marketing of “Jimi”-related products, the very subject of this lawsuit. He did so one day after the Court issued an order requiring the Purple Haze Properties defendants to: “produce to plaintiffs the forensic images of” every device, including phones, containing files that are relevant to this action. Pitsicalis did not offer any coherent defense to this misconduct. The Court finds it to have been a willful and blatant violation of the duty to preserve relevant evidence.

Finally, the Court finds that the removal of a computer from Andrew Pitsicalis’ office and its transfer to a Floridian, Hector David, Jr., was an act of intentional spoliation. To be sure, the question is a closer one, if only because the contents of that computer are unknown, and so the Court cannot rule out the possibility that these contents were wholly extraneous to this litigation. The location of the computer in Pitsicalis’ office, however, suggests otherwise. Had the Court been notified of the existence of this computer, it assuredly would have ordered that the computer’s contents be searched for responsive materials. It is also noteworthy that Andrew Pitsicalis did not inform his attorney of the existence of this computer. While conceivably these circumstances, in isolation, might have been consistent with the merely reckless disposal of evidence, when this episode is viewed in the light of Pitsicalis’ other acts of willful spoliation, the Court has little difficulty finding it, too, to bespeak intentional misconduct.

Sanctions Imposed

Judge Engelmayer begins his analysis of the appropriate, proportional sanctions by stating the black letter law:

The trial judge must determine the appropriate sanction for spoliation [*14] of evidence on a case-by-case basis. F, 247 F.3d at 436 . Such sanctions should be designed to:

(1) deter parties from engaging in spoliation; (2) place the risk of an erroneous judgment on the party who wrongfully created the risk; and (3) restore the prejudiced party to the same position [they] would have been in absent the wrongful destruction of evidence by the opposing party.

West, 167 F.3d at 779 . Case-dispositive sanctions, however, “should be imposed only in extreme circumstances, usually after consideration of alternative, less drastic sanctions.” Id.

Based on these objectives Judge Engelmayer sanctioned defendants as follows:

Considering these objectives, the Court imposes the following two sanctions, regarding (1) Andrew Pitsicalis’ computer, iPhone, and desktop computer; and (2) Schmitt’s computer, as to each of which the Court has found intentional spoliation. First, the Court will instruct the finder of fact that it may draw an adverse inference from the PHP parties’ failure adequately to preserve and produce these materials, to wit, that the devices in question contained evidence of conduct by the PHP defendants in breach of their legal duties to plaintiffs in connection with the sale and marketing of Jimi Hendrix-related materials.8

Second, given the resources plaintiffs again have had to expend in establishing the above-chronicled acts of non-compliance by the PHP defendants with the Court’s discovery orders, plaintiffs are entitled to an award reflecting the reasonable attorneys’ fees and costs incurred in connection with bringing and litigating the instant successful motion.

Judge Engelmayer went on to explain why a lesser sanction was inappropriate:

The Court has carefully considered whether lesser sanctions are adequate to cure the harm caused by the disposition of these materials. The Court’s firm conclusion is that no lesser sanction than the combination of an adverse inference instruction and an order directing the prompt recompense of plaintiffs for costs reasonably incurred litigating the meritorious motions for sanctions based on spoliation would adequately remedy plaintiffs’ injury. See, e.g., Moody v. CSX Transp., Inc., 271 F. Supp. 3d 410 , 432 (W.D.N.Y. 2017) (finding adverse inference appropriate where defendants intentionally lost material evidence); Ottoson v. SMBC Leasing and Finance, Inc., 268 F. Supp. 3d 570 , 584 (S.D.N.Y. 2017) (granting an adverse inference instruction where plaintiff “has acted willfully or in bad faith” in [*15] violation of her duty to preserve certain emails); First Fin. Sec., Inc. v. Freedom Equity Grp., LLC, No. 15-CV-1893-HRL, 2016 U.S. Dist. LEXIS 140087 , [2016 BL 337069], 2016 WL 5870218 (N.D. Cal. Oct. 7, 2016) (imposing adverse inference instruction for intentional deletion of text messages and awarding plaintiffs attorneys fees incurred in bringing sanctions motions). The Court has also carefully considered whether this is the rare case in which terminating sanctions are merited, as plaintiffs have urged. See Dkt. 237. At the present time, the Court’s judgment is that such extreme sanctions are not warranted, although further acts of spoliation and/or other discovery abuses could produce a different result.

The footnotes in these last paragraphs are interesting. Footnote 8 explains that “The Court defers decision on the precise formulation of the adverse inference instruction until closer to trial.” That means it could become a mandatory presumption, or merely permissive. Footnote 9 acknowledges that there may be more discovery misconduct in the works. The court noted it could still strike all defenses, if the conduct continues, and save everyone the cost of a trial.

Conclusion

Even with just a permissive presumption, the case at this point will almost certainly be won by Janie Hendrix’ company, Experience Hendrix, L.L.C.. Experience Hendrix, LLC v. Pitsicalis. Yet another loss for Jimi’s brother, Leon, in a long list of losses. Another injunction and businesses shut-down, but for how long? The Estate and L.L.C. have won so many times before. Yet they keep coming back. Is this yet another Pyrrhic Victory in a long line of pointless litigation? How long before the next suit? Some things are just beyond Law’s reach. Purple Haze.

Purple Haze

Purple haze all in my brain
Lately things just don’t seem the same
Actin’ funny, but I don’t know why
‘Scuse me while I kiss the sky

Purple haze all around
Don’t know if I’m comin’ up or down
Am I happy or in misery?
Whatever it is, that girl put a spell on me

Help me help me
Oh no no… No

Yeah
Purple haze all in my eyes
Don’t know if it’s day or night
You’ve got me blowin, blowin my mind
Is it tomorrow or just the end of time?

No, help me aw yeah! Oh no no oh help me…

When you are the best in the world at something, like Jimi Hendrix was at guitar playing, and when you are still famous and admired by millions fifty years after your death, there will be profiteers around. When you add sibling rivalry and family resentments to the mix, then the trouble goes from bad to worse.

The Hendrix family saga, and this lawsuit, are tragedies. So too is the destruction of evidence and this Sanctions Order. It is part of his guitar star legend. Jimi Hendrix’ boy genius was born out of a troubled childhood and family. Diamond in the rough. Bigger than life. Exploded with art, fame and fortune in just three years. Dead at age 27 of an overdose. The day he was born the moon turned a fire red, “Lord, the gypsy was right!”

The greatest guitarist of all time was a Phoenix – tragic, fiery, short-lived, but beautiful and spell-binding too. Where will musical genius appear like that again?

4 Comments | Evidence, Forensic Exam, Lawyers Duties, New Rules, Review, Search, Spoliation/Sanctions | Tagged: best practices, discovery, document review, ethics, evidence, facebook, law, legal profession, preservation | Permalink
Posted by Ralph Losey

Judge Pauley Reminds Lawyers Of Their Duty To Verify Client Representations

October 14, 2018

Senior SDNY District Court Judge William Pauley recently reminded the Bar of “the importance of verifying a client’s representations.” Lawrence v. City of N.Y., Case No. 15cv8947 (SDNY, 7/27/18) copy linked. Amen to that! As will be explained, in e-Discovery authenticity of “documents,” which are really nothing more than ephemeral computer files, zeros and ones, is a constant concern. If an electronic document is too good to be true, it may not be. It is important that you question the origin of important evidence, that you ignore popular wisdom and look a gift horse in the mouth.

If it is key electronic evidence, then give it a full dental exam, including especially the metadata. Plaintiff’s counsel in this case failed to do that. He barely glanced at the horse. As a result the case was lost and so was he. He was forced to withdraw and almost personally sanctioned for violation of Rule 3.3 Candor Toward The Tribunal, ABA Model Rules of Professional Conduct. Also see: Greene, Attorney Avoids Sanctions Over Client’s ‘Staged Photos’ (Bloomberg Law 7/31/18) (“Attorney won’t be sanctioned for failing to discover that his client had lied about when digital photos were taken in order to support her case against New York City police officers.”).

SUMMARY OF LAWRENCE

Continuing its tradition as the wrong court in which to play e-discovery games, the SDNY sanctioned the plaintiff in Lawrence by complete and final dismissal of her case. She had tried to hide the ball, at least part of the ball, the important metadata part of seventeen photos. The plaintiff’s attorney produced scanned PDFs of the paper printouts of the original photos, not the actual original photos. The original of the ESI here is the computer files on plaintiff’s phone. The attorney never even looked at the originals. Just the printouts. It never occurred to him to authenticate them, not even through close questioning of his client. She might have lied to her lawyer, but who knows; apparently he never asked.

Metadata of the original electronic file on the phone includes the date the photos were taken. The defendant city wanted to see these originals because a conflict in plaintiff’s testimony suggested that the key photos of her apartment might not be genuine. Once the original native files were recovered from the phone, they showed that the photos were taken years later than alleged, in fact, they were taken the day before she gave them to her lawyer. They were staged.

By hiding the metadata the Plaintiff was obviously trying to perpetrate a fraud on the court. The ultimate sanction was entered in the case. The case was dismissed with prejudice by the District Court Judge. He did not also enter monetary sanctions only because the plaintiff was indigent.

Aside from imposing the ultimate sanction, the opinion is memorable because the facts were not sufficient for a Rule 11 violation, but were for a violation of Rule 26(g). Rule 26(g) is often called the Rule 11 of Discovery. This case shows that and explains why. Interesting only to super FRCP nerds I suppose, but I liked seeing this discussion because it is so rare.

Judge Pauley

Lawrence is also memorable for appearing to state, incorrectly, that Rule 37(e) does not apply because the attorney was not to blame and he did not violate a discovery order. This was probably not intended by Judge Pauley, but that is how the opinion reads. The attorney’s innocence, or not, is not a factor on whether one party is entitled to relief under Rule 37. It should only impact the scope of the sanction, whether the sanction should include the attorney. Here is the analysis by Judge William Pauley that concerns me:

Rule 37 does not apply to this situation. This rule “provides generally for sanctions against parties or persons unjustifiably resisting discovery.” Fed. R. Civ. P. 37 advisory committee’s note; see Nieves v. City of N.Y., 208 F.R.D. 531, 535 (S.D.N.Y. 2002) (explaining that Rule 37 seeks in part to “obtain compliance with discovery orders”). Here, Leventhal did not fail to comply with discovery orders, to supplement an earlier response, or to preserve electronically stored information. Further, there is no showing that his actions were willful or part of a pattern of noncompliance. “Willful non-compliance is routinely found . . . where a party has repeatedly failed to produce documents in violation of the district court’s orders.” Doe v. Delta Airlines, Inc., 2015 WL 798031, at *8 (S.D.N.Y. Feb. 25, 2015) (citation omitted). Instead, Leventhal was unaware of Lawrence’s actions and took corrective action after learning that the photographs were taken two years later. Defendants have not shown that Leventhal handled his discovery obligations in an unethical or willfully non-compliant manner.

This holding re Rule 37 should be limited to the unusual facts of Lawrence. The production of altered and faked evidence to another party, instead of the originals, certainly can be a Rule 37 violation. You do not have to prove that the attorney was in on it before Rule 37 applies. Also, the opinion suggests that the plaintiff did have contemporaneous pictures of her apartment from two years earlier when the incident took place, but she did not save them. She destroyed them and so Rule 37(e) should apply too. Remember, subsection (e) applies when ESI “that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it.” Lost includes destroyed and substituted with fake pictures. Furthermore, unjustifiably resisting discovery certainly should include producing fake documents, instead of the original ESI requested. Instead, Judge Pauley looks to the attorneys actions and finds that his actions were willful or part of a pattern of noncompliance. The party’s actions are what matter here and the plaintiff here unquestionably acted willfully and as part of a pattern of non-compliance.

Inherent Power of the Court

The main grounds for the case dismissal sanction was the inherent power of the court to sanction a party for bad faith litigation conduct. This case should be cited for this proposition, as well as for Rule 26(g). Note that the Plaintiff had a couple of interesting explanations for creating staged photos of her apartment to try to prove her case. First, she said she had a mental illness and that is why she did it. Then, at a deposition, she added that her medications prevented her from testifying truthfully. She did in fact have a history of mental illness, but, of course, that did not justify her attempted fraud on the court. Still, it is an interesting twist that you do not see very often.

“Our judicial system generally relies on litigants to tell the truth . . . .” McMunn, 191 F. Supp. 2d at 445. Therefore, “[f]raud upon the court . . . seriously affects the integrity of the normal process of adjudication.” Hargrove v. Riley, 2007 WL 389003, at *11 (E.D.N.Y. Jan. 31, 2007) (citation and marks omitted). “[T]ampering with the administration of justice . . . involves far more than an injury to a single litigant. It is a wrong against the institutions set up to protect and safeguard the public, institutions in which fraud cannot complacently be tolerated consistently with the good order of society.” Shangold v. Walt Disney Co., 2006 WL 71672, at *4 (S.D.N.Y. Jan. 12, 2006) (citing Hazel-Atlas Glass Co. v. Hartford-Empire Co., 322 U.S. 238, 246 (1944)). . . .

These shifting explanations are as troubling as the photographs themselves. This Court does not know how it can credit any of Lawrence’s explanations. In considering the factors relevant to sanctions, most, if not all, support a harsh sanction. First, it is clear that the photos were intentionally staged. Photographs do not create themselves, and Lawrence’s belated attempts to explain them are not worthy of belief. From this Court’s review of the photographs, it is clear that Lawrence or someone on her behalf intentionally staged scenes of her apartment, including ripped furniture, a couch turned over, a broken air-conditioner, and disassembled stereos. Whether Lawrence personally created the photographs or not, she embraced them and willingly testified that they accurately depicted the condition of her apartment as of August 2014. . . .

Lawrence’s mental illness, while a mitigating factor, does not excuse her actions. Memory lapse does not explain manufactured exhibits and perjured testimony. This Court cautioned Lawrence that she needed to provide [*10] a credible explanation for her actions. (Feb. Hr’g Tr., at 13:1-4; 13:10-12.) She has failed to do so. As this Court stated in February, Lawrence may not be a lawyer, but she “know[s] the difference between giving honest testimony and providing honest exhibits as opposed to giving perjured testimony and manufacturing exhibits . . . [b]ecause that’s the difference between right and wrong.” (Feb. Hr’g Tr., at 11:4-10.)

Lawyers Ethical Duty to Prevent Fraud on the Court

The final lesson we learn from Lawrence comes from Judge Pauley’s evaluation of the conduct of the lawyer representing this fraudulent plaintiff, Jason L. Leventhal. Judge Pauley begins his opinion in Lawrence with the statement: This Opinion & Order showcases the importance of verifying a client’s representations. The opinion then makes clear that Leventhal did not do that here. The lawyer just accepted his client’s representations that she had taken these photos and done so at the time of the incident, two years earlier. Jason never asked to see the phone or metadata to verify that these were in fact taken at the time. He just took his client’s word for it that everything was legitimate. This opinion suggests that was a mistake, although the lawyer was not sanctioned this time. It was close. We should all be aware of the Big Bad Wolf client who comes in with computer evidence too good to be true. Look carefully, Grandma may be a wolf and you may be tangled in a web of fraud.

The attorney who failed in his verification duties in this case helped his case by moving to withdraw as soon as the Defendant City discovered the photos were fraudulent. Leventhal also hired ethics counsel, Michael Ross, to represent him and plead his innocence. Ross even filed an affidavit about what happened. Reading between the lines it seems clear that Leventhal himself was very nearly sanctioned. For all we know an ethics complaint may have been filed with the local Bar.

The ethics issue is whether Leventhal violated Model Rule of Professional Conduct 3.3, Duty of Candor Toward the Tribunal, which states:

Advocate

(a) A lawyer shall not knowingly:

(1) make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer;

(2) fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel; or

(3) offer evidence that the lawyer knows to be false. If a lawyer, the lawyer’s client, or a witness called by the lawyer, has offered material evidence and the lawyer comes to know of its falsity, the lawyer shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal. A lawyer may refuse to offer evidence, other than the testimony of a defendant in a criminal matter, that the lawyer reasonably believes is false.

(b) A lawyer who represents a client in an adjudicative proceeding and who knows that a person intends to engage, is engaging or has engaged in criminal or fraudulent conduct related to the proceeding shall take reasonable remedial measures, including, if necessary, disclosure to the tribunal.

The official Comment to Rule 3.3 has some good insights into the purpose of this requirement:

Offering Evidence

[5] Paragraph (a)(3) requires that the lawyer refuse to offer evidence that the lawyer knows to be false, regardless of the client’s wishes. This duty is premised on the lawyer’s obligation as an officer of the court to prevent the trier of fact from being misled by false evidence. A lawyer does not violate this Rule if the lawyer offers the evidence for the purpose of establishing its falsity.

6] If a lawyer knows that the client intends to testify falsely or wants the lawyer to introduce false evidence, the lawyer should seek to persuade the client that the evidence should not be offered. If the persuasion is ineffective and the lawyer continues to represent the client, the lawyer must refuse to offer the false evidence. If only a portion of a witness’s testimony will be false, the lawyer may call the witness to testify but may not elicit or otherwise permit the witness to present the testimony that the lawyer knows is false.

With these ethical requirements in place it is easy to understand why Plaintiff’s attorney, Leventhal, moved to withdraw and hired ethics counsel to represent him personally in these sanction proceedings. The defense was based on innocent ignorance on metadata and the possibility that these photos were fake. It is the most popular and widely used defense in this situation. I call it the caveman lawyer defense.

Here is Judge Pauley’s final ruling that let Leventhal off the hook. (Citations to record removed.)

Leventhal accepted his client’s representations and after reviewing the photographs, saved them to a PDF, Bates-stamped them, and produced them to Defendants. At that time, Leventhal was unfamiliar with electronically stored metadata and “did not doubt [that] the photographs were taken contemporaneously with the occurrence of the damage.” . . .

When Defendants checked the photographs’ metadata, they learned that 67 of the 70 photographs had been taken in September 2016—two years after the incident and immediately before Lawrence provided them to Leventhal. In September 2017, Defendants sent a Rule 11 safe-harbor letter to Leventhal.

In October 2017, Leventhal moved to withdraw as counsel, asserting that “based upon facts of which [he] was not aware . . . [he] hereby disavow[ed] all prior statements made [regarding] the photographs.” At an October 2017 conference, Leventhal’s ethics counsel represented that at the time of production, Leventhal “did not believe or have reason to believe that there was any question about the date or provenance of the photographs.” Ethics counsel also stated that other events now compelled Leventhal to withdraw. While Leventhal’s motion was pending, Lawrence terminated Leventhal’s representation.

In December 2017, this Court granted Leventhal’s motion to withdraw and afforded Lawrence two months to secure new counsel. Lawrence was unable to engage a new lawyer and appeared pro se. . . .

Leventhal repeatedly attempted to gain access to the devices containing the photos. Further, some of the photographs appear to show damage to Lawrence’s apartment consistent with her testimony, including a mattress and couch torn open, and damage to other items. Therefore, a reasonable lawyer would not have doubted that they showed what Lawrence claimed. Finally, Leventhal explains that at the time he produced the photos he was unfamiliar with the process for checking a digital photograph’s metadata, which entails right-clicking it and navigating to its properties.

Based on these facts, Leventhal’s production of the photos may have been careless, but was not objectively unreasonable. Cf. Johnson v. BAE Sys., Inc., 4 F. Supp. 3d 62 , 307 F.R.D. 220 , 226 (D.D.C. 2013) (sanctioning attorney for producing doctored medical records without any inspection or inquiry whatsoever).

Leventhal was not sanctioned, even though the Judge found that he was careless in accepting without scrutiny his client’s “newly found” electronic evidence. There is some fine hair-splitting going on here. He was careless, but he was not “objectively unreasonable.” Had he been the later, he could have been sanctioned. I wonder how much longer that kind of aw shucks defense will work anywhere, especially in the SDNY? I would not want to have to play that card. Would you?

Conclusion

If the client comes to you and says they have found great evidence to support their case, then disregard the popular saying. Look the gift horse in the mouth. Look at it carefully, especially if it becomes key evidence to prove your case. If it is too good to be true, maybe it’s not. There could be metadata deep in the ESI, like in this case, that shows the pictures to be fake. Date of Creation is the most common red flag, but there are others, including some little known internal system metadata markers. Sorry, but I am not doing to discuss that publicly for safety concerns.

When you get a great photo that makes your case, then at least look at the metadata and confirm the date, camera and GPS location (if that feature is turned on). Do not be naïve. Be skeptical. Be a lawyer. Check out the evidence. Look the gift horse in the mouth. If those teeth are rotten and fake, you could easily become ensnared in a conspiracy to get fake computer files into evidence. Don’t know what you are seeing? Then hire a dentist, so to speak, an ESI specialist. They can help you out. And yes, most do provide Novocain or Nitrous Oxide upon request to make e-discovery as painless as possible.