Uniform Law Commission Approves Model e-Discovery Rules

The Uniform Law Commissioners have now adopted model rules of e-discovery for use by state courts.   Uniform Rules Relating To Discovery of Electronically Stored Information.  The proposed uniform rules of civil procedure essentially clone the bigger federal rules. Rex Blackburn, the Boise, Idaho, attorney who chairs the committee that drafted the new rules, explained why the Commissioners thought this was necessary:

With the emergence of electronic technology, the extent to which information is stored electronically has vastly increased, and will continue to do so. These new uniform rules should provide states with the necessary guidance governing discovery of electronically stored information.

The proposed state rules for e-discovery closely follow the federal rules. Just like the federal rules, the proposed state rules have provisions requiring early discussion of e-discovery, protection from production of not-reasonably-accessible information with cost shifting, privilege protection procedures, a default “ordinarily maintained” or “reasonably usable” production mode, and a safe harbor from sanctions for routine, good faith destruction.  It is interesting to see how the early discussion requirements in model State Rule 3 are required within 21 days of a party’s appearance, and are not tied into a court hearing or order as in Federal Rule 26.  That was designed to appeal to those states that have declined to adopt a counterpart to the federal “meet and confer” obligations of Rules 16 and 26.  There are several other more significant differences; some good and some bad.  I will review these at the end.

The Uniform Law Commission issued a Press Release on August 2, 2007, to announce the proposed e-discovery rules. The influential National Conference of Commissioners on Uniform State Laws hopes all states will now adopt these rules so that there will be uniformity of practice outside of the federal system, and will now lobby the state courts and legislatures to adopt these rules.  The Conference was formed in the early 1890s and claims to be the oldest state governmental association in the country. President Woodrow Wilson, former Supreme Court Justice Louis Brandeis, former Supreme Court Chief Justice William H. Rehnquist, and current Supreme Court Justice David Souter all served as uniform law commissioners.  It is the source of more than 250 uniform acts, including the Uniform Commercial Code, Uniform Fraudulent Transfer Act, Uniform Interstate Family Support Act, Uniform Enforcement of Foreign Judgments Act, and the Uniform Transfers to Minors Act. The Conference seeks “to secure uniformity of state laws where diversity obstructs the interests of all the citizens of the United States.” The model Discovery of Electronic Records Act has been over two years in the making. Final approval came at the 116th Annual Meeting in Pasadena, California, on August 2, 2007.

The Draft Text of the Rules included Prefatory and Reporters Notes, which, as always, were excluded from the final version approved as a model to be adopted by the states.  The Notes are not intended to be authoritative, but still are interesting to understand the thinking behind the committee that prepared the rules.  You might want to review the Draft Text for that reason.  Here are a few highlights of the Notes that I found interesting:

With very few exceptions, when the state rules and statutes concerning discovery in civil cases were promulgated and adopted, information was contained in documents in paper form. Those documents were kept in file folders, filing cabinets, and in boxes placed in warehouses. When a person or business or governmental entity decided a document was no longer needed and could be destroyed, the document was burned or shredded and that was the end of the matter. There was rarely an argument about sifting through the ashes or shredded material to reconstruct a memo which had been sent.

In today’s business and governmental world, paper is a thing long past. By some estimates, 93 percent or more of corporate information was being stored in some sort of digital or electronic format.  This difference in storage medium for information creates enormous problems for a discovery process created when there was only paper. Principal among differences is the sheer volume of information in electronic form, the virtually unlimited places where that information may appear, and the dynamic nature of electronic information.  

The Notes explain that the Commission Drafting Committee intentionally copied the new revisions to the Federal Rules, cloning their “spirit and direction,” and sometimes even using the exact same language.  

There are, however, a few substantive differences between the federal and proposed state rules.  One in particular caught my eye.  Unlike the federal rules, the proposed uniform state rules define the term “Electronically Stored Information” (“ESI”). The federal drafting committee did not define ESI on purpose, so that tomorrow’s not-yet-invented information technologies would more easily come within the scope of ESI. The state commissioners were apparently not as concerned about this possibility, and so they went ahead and defined ESI in Rule 1(3):

“Electronically stored information” means information that is stored in an electronic medium and is retrievable in perceivable form.

They also define “electronic” in Rule 1(2) to mean: “relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.” 

These definitions seem awkward and ambiguous to me. One wonders why they talk about “retrievable in perceivable form”? Why this focus on perception? If it is not perceivable, then how would you know it had been restored? What information could be retrieved, but in an “imperceivable form”? Imperceivable by whom or what? If a human being could not perceive it, but a machine could, would it still be imperceivable? What if it were sounds that only my dog could hear? Or infrared light? As to the definition of “electronic”, what does “similar capabilities” mean? What if the capabilities of a new technology were completely new?  Would all the states have to revise their definitions to clarify that the information the new technology stored or created was covered by these rules?  Bottom line, there is ambiguity inherent in these definitions as to what information is, or is not, covered by the rules, and what might be in the future. The attempt to gain certainty by defining these terms has, ironically, only added uncertainty. I think the federal rules got it right on this point, and predict that these proposed state rule definitions will only lead to trouble in the long run.

Another significant difference is found in the approach to protection of not-reasonably-accessible ESI.  Federal Rule 26(b)(2)(B) protects such information from production unless the requesting party makes a good cause showing.  The Federal Rule itself does not spell out the considerations for such good cause; but only refers to the limitations of Rule 26(b)(2)(C). You have to look to the Rule Commentaries to find a non-exhaustive list of seven considerations:

(1) the specificity of the discovery request;
(2) the quantity of information available from other and more easily accessed sources;
(3) the failure to produce relevant information that seems likely to have existed but is no longer available on more easily accessed sources;
(4) the likelihood of finding relevant, responsive information that cannot be obtained from other, more easily accessed sources;
(5) predictions as to the importance and usefulness of the further information;
(6) the importance of the issues at stake in the litigation; and
(7) the parties’ resources.

Model State Rule 8(c) takes a different approach and specifies the good cause considerations in the Rule itself.  Moreover, there are only four considerations listed, instead of seven, and this list of four is exhaustive.

The court may order discovery of electronically stored information that is from a source that is not reasonably accessible because of undue burden or expense if the party requesting discovery shows that the likely benefit of the proposed discovery outweighs the likely burden or expense, taking into account (1) the amount in controversy, (2) the resources of the parties, (3) the importance of the issues, and (4) the importance of the requested discovery in resolving the issues. (numbers added)

The four considerations listed in the state rule are taken directly from old Federal Rule 26(b)(2)(C) which states in part:

(C) The frequency or extent of use of the discovery methods otherwise permitted under these rules and by any local rule shall be limited by the court if it determines that:  . . . (iii) the burden or expense of the proposed discovery outweighs its likely benefit, taking into account the needs of the case, the amount in controversy, the parties’ resources, the importance of the issues at stake in the litigation, and the importance of the proposed discovery in resolving the issues.  . . .  (emphasis added)

The proposed state rule thus follows the federal big brother by incorporating part of 26(b)(2)(C), but deviates significantly by limiting the court to only these four factors.  The wording does not include the rest of 26(b)(2)(C), and does not include the first four federal commentary criteria: (1) specificity of request, (2) quantity available from other sources, (3) failure to produce other more reasonably accessible relevant information, and (4) likelihood of finding other relevant information from more easily accessible sources.  Under the proposed rules, a state court would arguably be prohibited from considering anything other than the four rather simplistic 26(b)(2)(C) type factors specified. This does not appear to be as well thought out and balanced as the federal approach, and will, I predict, draw strong opposition from the Plaintiff’s Bar.

Another significant difference can be found in proposed state Rule 8(e) which articulates a “proportionality” limitation on the production of all ESI, even readily accessible live data: 

(e) The court shall limit the frequency or extent of discovery of electronically stored information, even from a source that is reasonably accessible, if the court determines that:

(1) it is possible to obtain the information from some other source that is more convenient, less burdensome, or less expensive;
(2) the discovery sought is unreasonably cumulative or duplicative;
(3) the party seeking discovery has had ample opportunity by discovery in the proceeding to obtain the information sought; or
(4) the likely burden or expense of the proposed discovery outweighs the likely benefit, taking into account the amount in controversy, the resources of the parties, the importance of the issues, and the importance of the requested discovery in resolving the issues.

Rule 8(e) is an improvement over the wording of the federal rules where you have to consult old Rules 1 and 26(b)(2)(C) to find these proportionality limitations, and even then, not as clearly as many would like. See my July 12, 2007, Blog on the Second Edition of the Sedona Principles and the Need for Proportionality. This provision will also be opposed by the Plaintiff’s Bar, but more as a knee jerk reaction that anything else. The protection from needlessly expensive discovery cuts both ways. The costs of e-discovery must be contained somehow. Otherwise, as Justice Breyer recently pointed out, in the future only the very rich will be able to afford to litigate.

Heavy Sanctions Loom Against Attorneys for e-Discovery and other “Aggravated Litigation Abuses”

The other shoe has dropped in a case that many California attorneys were already talking about, Qualcomm Inc. v.  Broadcom Corp.; it hit with such a loud thud that attorneys all over the country will now take notice. Qualcomm Inc. v. Broadcom Corp., No. 05-CV-1958-B(BLM) Doc. 599 (S.D. Cal. Aug. 13, 2007). This is an Order to Show Cause directed against all attorneys who represented the plaintiff, Qualcomm, in a patent infringement case it brought against Broadcom.  The Order specifically names 14 attorneys from two prominent law firms, one local and one national, but also includes “any and all other attorneys who signed discovery responses, signed pleadings and pre-trial motions, and/or appeared at trial on behalf of Qualcomm.” The Order requires these attorneys to appear in the District Court in San Diego on August 29, 2007, at 9:30 a.m. to show cause why sanctions should not be imposed against them for failure to comply with the Court’s orders.  The court granted a subsequent motion for continuance by the 14 attorneys and the hearing date was moved to Friday, October 12, 2007 at 9:30 a.m.  The motion states the Order raises “serious issues that potentially impact the legal careers” of the attorneys.

The Order to Show Cause by Magistrate Judge Barbara Lynn Major comes on the heels of the 54-page Order on Remedy for Finding of Waiver, entered August 6, 2007, by District Court Judge Rudi M. Brewster.  Qualcomm Inc. v. Broadcom Corp., No. 05-CV-1958-B(BLM) Doc. 593 (S.D. Cal. Aug. 6, 2007). There, the District Judge found “by clear and convincing evidence that Qualcomm['s] counsel participated in an organized program of litigation misconduct and concealment throughout discovery, trial, and post-trial before new counsel took over lead role in the case on April 27, 2007.”  Among other things, this first-shoe-to-drop opinion highlighted Qualcomm’s production of over 200,000 pages of relevant emails and other electronic documents four months after the jury trial (that Qualcomm lost). Judge Brewster impugned Qualcomm’s counsel and their claims that they carried out their discovery obligations in good faith, explaining:

Qualcomm counsel’s discovery responses demonstrate that they were able to locate with alacrity company records from December 2003 forward and find four or more Qualcomm employees participating in proceedings of the [Joint Video Team ("JVT")]. Yet inexplicably, they were unable to find over 200,000 pages of relevant emails, memoranda, and other company documents, hundreds of pages of which explicitly document massive participation in JVT proceedings since at least January 2002. These examples of Qualcomm counsel’s indefensible discovery conduct belie counsel’s later implied protestation of having been “kept in the dark” by their client.

Judge Brewster’s 54-page opinion detailed the actions of Qualcomm and its counsel, concluding that these facts demonstrate “aggravated litigation abuse.” The court found “constant stonewalling, concealment, and repeated misrepresentations concerning existing corporate documentary evidence.” In spite of such discovery tactics, Qualcomm lost the jury trial, and then the full extent of its abuses was revealed. Qualcomm then fired its lead counsel, and its substitute counsel tried unsuccessfully to explain it all away.  In the words of the court, the substitute lead counsel “adamantly denied the obvious and then, when the truth was discovered and exposed by the document production, sequentially contended denial of relevance, justification, mistake, and finally non-awareness.”

The end result of the 54-page opinion was to hold and order that Qualcomm had completely waived its rights to enforce the two video compression patents (5,452,104 and 5,576,767) at issue in the case. The waiver applies not only against Broadcom, but against anyone. The waiver was caused by Qualcomm’s prior inequitable conduct before the Patent Office, conduct that Qualcomm tried to cover up in this litigation. 

On August 6, 2007, Judge Brewster also entered an Order Granting Broadcom Corporation’s Motion for Exceptional Case Finding and for an Award of Attorneys’ Fees (35 U.S.C. § 285).  Qualcomm Inc. v. Broadcom Corp., No. 05-CV-1958-B(BLM) Doc. 594 (S.D. Cal. Aug. 6, 2007).  Judge Brewster there held that: “the enumerated misconduct of Qualcomm establishes the entitlement of Broadcom to all attorneys’ fees, expenses, and costs incurred in the defense of this case.” If the parties are unable to agree on a reasonable number, an evidentiary hearing is to be held before the Magistrate.  I would anticipate a very large fee and costs award in this case.  It was filed in 2005, and tried before a jury for over two weeks in early 2007.

Back to the Show Cause Order of August 13, 2007, against Qualcomm’s many outside counsel; the Magistrate advised these attorneys that is was considering a host of possible sanctions against them for the egregious conduct the Court had observed:

As such, this Court is inclined to consider the imposition of any and all appropriate sanctions on Qualcomm’s attorneys, including but not limited to, monetary sanctions, continuing legal education, referral to the California State Bar for appropriate investigation and possible sanctions, and counsel’s formal disclosure of this Court’s findings to all current clients and any courts in which counsel is admitted or has litigation currently pending. (emphasis added)

A mandatory disclosure notice like that would be a serious blow to most law firms.  Many will be watching to see what sanctions are actually imposed. 

Qualcomm’s in-house legal counsel have not been immune from consequences either.  For instance, Qualcomm’s General Counsel suddenly resigned the same day the Show Cause Order issued.

Should You Save Internet Cache?

Does the duty to preserve potential evidence require you to save your Internet cache? A district court in Pennsylvania recently addressed this issue, and, indirectly at least, said NO. Healthcare Advocates, Inc. v. Harding, Earley, Follmer & Frailey, 2007 WL 2085358 (E.D. Pa. June 20, 2007). The court held that the defendant’s automatic and unwitting deletion of cache files did not constitute spoliation, and did not warrant any kind of sanctions, even though potential evidence had been destroyed.  The court did not squarely hold there was no duty to preserve Internet cache per se; instead, it held that, in this case, the destruction of evidence contained in the temporary cache files was accidental, and was not prejudicial, so no sanctions were appropriate.

In my opinion, the court here got it right, and in most cases there is no need to take the time and effort required to preserve cache files. Still, there may be rare exceptions to this general rule where you should save cache; for instance, if an employee is fired for viewing porn-sites at work and then he or she immediately files suit.  In this circumstance, Internet cache files would provide critical evidence, and the custodian of the computer should save the cache.  Assuming the employer knows about Internet cache, then they would want to preserve the cache, because it proves what websites have been visited on a computer.  Of course, if the employer does not know about cache files, and how they can be automatically deleted, much like the law firm defendant apparently claimed in the Healthcare Advocates case, then they would not know to save their cache.  Can you breach a duty to preserve evidence that you did not even know existed, much less was in danger of destruction?  That is a difficult question that was not really answered by this case.  The answer depends on whether you think the party, or their lawyer, should have known about cache files, such that it was negligence, perhaps even gross negligence, not to preserve these mystery files.

Most of the readers here will know what Internet cache files are. But some may not be sure, so let’s start with a wee bit of technical background.  Internet cache is not a misspelled ”Pay-Pal” money thing, it’s a temporary storage area where frequently accessed data are placed for subsequent rapid access.  It can be RAM memory type cache, or it can be cache that is written to a drive.  The Internet cache files we are talking about here are of the latter variety.  Microsoft calls this kind of cache ”Temporary Internet Files.”

As you know, when you “go to” an Internet website, the website is actually coming to you.  Copies of the website files are transferred from the web server computer to your computer. These files are actually downloaded and saved to your computer hard drive.  (There are of course some exceptions to this for some website content, such as streaming video and the like, but as a general rule this is how it works.) These html and related web files are then viewed with your browser software, such as Microsoft’s Internet Explorer, from your own computer. The place where the downloaded web files are stored on your computer is called the “Internet cache.” Many people do not know that when they leave a website, and go someplace else on the web, the website itself remains lurking and hidden on their computer. 

The Internet cache web files are stored on your computer because you may return to that same website again.  If you do, and you point your browser to the same address, the browser will know that it already has the web in its cache, and so will not actually go out and fetch it again from the remote webserver. That could take some time. The browser will instead just display the web files you have already visited and stored in your cache.  It is much faster that way, which is the whole point of a cache. Of course, in the meantime, the web may have changed, and you may not know it because you are looking at the web you previously downloaded.  No worries, however, because you can defeat that, and force the browser to go out and get the file again from the webserver, by simply using the refresh file function.

You may wonder where these Internet cache files are stored; for if you do not know that, it is hard to preserve them. Assuming you are using Explorer, go to the ”Tools” menu at the top, and select “Internet Options.”  The first “General” page will have a “Browsing History” section. In Internet Explorer 7, you have the option to “Delete temporary files, history, cookies, saved pass words and web form information.”  If you hit the “Delete” button you will erase all of the Internet cache files, the history of the webs you have visited. To the right of the “Delete” button is the “Settings” button.  Go to the “Settings” page (the Explorer 6 version of this page is shown in the graphic below)  and you will find choices for storing Internet files, meaning how often the browser will check to see if the web page has changed from the version stored on your disk.  The Settings page also shows where these files are currently located. That is the location of your Internet cache, a/k/a your Temporary Internet Files folder.  It will also allow you to specify how much space you want to allocate for the cache.  When that limit is filled it will start writing over the old cache files.  You can choose from between 8 to 1024 megabytes.  Many people max out to the 1024 limit because space is plentiful and cheap, and the more cache the faster your web browsing.

The default location for the Internet cache is usually something like what is shown above: “C:\Documents and Settings\v-megans (the user’s name)\Local Settings\Temporary Internet Files\”.  But you can change that to be any location you would like. On this same menu, you can also choose to view these files.  At the bottom of this page, Explorer allows you to specify how many days to save “the list of websites you have visited.” This is not a full cache of the websites visited, just a list of the addresses. 

The above summary is not intended to be complete; there can be many variances depending on browser software and other configurations.  In addition, other files are cached when the Internet is used, most especially for email, where copies of all emails sent and received may be stored on disk in other locations depending on the software utilized.

Back to the Healthcare Advocates case: it involves some very interesting facts, albeit a farfetched complaint.  I do not have all of the facts underlying this law suit (some are filed under seal), but from the court’s opinion, it appears that this is little more than a sour grapes type of spite suit.  To understand this case, you have to understand the one that preceded it.  There the same plaintiff, Healthcare Advocates Inc. (hereinafter “HAI”), sued a competitor for trademark infringement and trade secret misappropriation.  HAI lost this case, in large part because of excellent lawyering by the defendant’s attorneys, the law firm of Harding, Earley, Follmer & Frailey (hereinafter “Harding”).  Harding used the very handy service found at archive.org called the “Wayback Machine.” If you are not already familiar with this web and service, I suggest you check it out.  The archive’s Wayback Machine allows you to view prior versions of websites that have been saved by archive.org.  It is a very good way to determine what trademarks and other materials were actually in use by a company in the past.  Harding used it to find out what HAI’s website had looked like in the past.  The old versions of HAI’s web proved to be very powerful evidence against HAI, and they lost their case by summary judgment. 

So what did HAI do next?  They filed yet another law suit, this time against their competitor’s attorneys, the Harding law firm. Unbelievable, but true! What horrible things is the law firm alleged to have done? HAI accuses them of violating their copyrights by “hacking” the Wayback Machine so as to download old versions of their website! Never mind that there was no evidence of hacking, and Harding only used the archive.org repository the way any good law firm would: to find the truth and defend their client.

To add insult to injury, HAI tried to dress up this second case with charges of spoliation based solely on Harding’s failure to preserve the Internet cache files of the old HAI’s web pages.  HAI even had the audacity to argue that the law firm should have stopped using their computers altogether so that the temporary cache files would not be lost.  In their losing cross-motion for summary judgment, HAI’s lawyers got carried away, again, and argued that Harding’s failure to stop using their computers to preserve the Internet cache was such a bad act of spoliation that it ”shocks the conscience.” Here is the understated way the court responded to these arguments:

The Harding firm had no reason to anticipate that using a public website to view images of another public website would subject them to a civil lawsuit containing allegations of hacking.

Thus, the failure to immediately remove computers that the firm used every day, when they had no reason to believe that their actions would subject them to a lawsuit for “hacking,” is not an action that shocks the conscience.

I am pleased to report that this second suit has been dismissed too, again by summary judgment. Obviously it was a “fair use” by the law firm of the discontinued copyrighted web pages, and not even close to a copyright infringement.  Moreover, the spoliation charges were just as bad.  It is not clear from the opinion, but I think that Harding knew full well about Internet cache files.  It is after all a group of Phildelphia lawyers specializing in intellectual property law. Harding simply choose not to preserve these files because there was no reason to save them.  They had already printed out all of the webs, and used them in evidence. Why should they also preserve the cache?  The whole suit by HAI is just plain bizarre. The court agreed, and found no prejudice at all to the plaintiff from the deletion of the cache files.

There are two more things that surprise me about this case. First, Internet Archive, the non-profit group behind www.archive.org,  was joined as a defendant to the case.  That is not surprising given HAI’s obvious litigiousness, but it is hard to understand why the archive group settled with HAI, instead of moving for summary judgment. Apparently, they were concerned because their exclusion policy, which supposedly allows any website to opt-out of the archive and its Wayback Machine by the use of a robots.txt file, did not work in this case.  HAI had, for obvious reasons, tried to have its web excluded from the archive before it filed the first law suit against its competitor, but the exclusion failed and Harding was able to get at the truth. The terms of the settlement are confidential, so we can only speculate why Internet Archive preferred to settle.  The second surprising thing is that the Harding firm provided HAI with a forensic image of their computer’s hard drives. It impressed the court that Harding had nothing to hide, but one wonders why they bothered.

Although not reported in the decision, my review of the docket sheet for this case shows that there is now a motion pending by Harding for an award of $161,461.50 in attorney fees. They argue that this is a frivolous case, and an award of fees in this amount, plus costs of $9,348, is justified.