The Duty to Preserve & the Spoliation Doctrine in the Maryland State Courts

My article, “The Duty to Preserve ESI (Its Trigger, Scope, and Limit) & the Spoliation Doctrine in Maryland State Courts” was recently published in the University of Baltimore Law Forum, Vol. 45 (2015).  The article discusses Maryland case law addressing the issue, suggests a modern analytical framework, and concludes with a cautionary note based on the Qualcomm v. Broadcom decisions of 2008:  “There are good reasons to approach sanctions decisions with great caution.  They often arise in an unclear context…, may negatively impact civility and have the potential to unfairly destroy careers.”

Posted in Commercial Litigation, ESI

News Report: Update on Mark T. Pappas of Victor Stanley v. Creative Pipe “Fame”

The August 19 2012, Maryland Daily Record reports that “Fuvista” CEO Mark T. Pappas was conditionally released after two weeks in jail.  He reportedly wired $120,000 to pay a portion of the civil sanctions in the Victor Stanley v. Creative Pipe case.  The Daily Record reports that The Hon. Marvin J. Garbis “adjourned the hearing without ruling on the remainder of the contempt charges, which stem from Pappas’ failure to make payments on more than $1 million in sanctions he incurred for e-discovery violations during a lawsuit his company ultimately lost.”  The paper reports that:

Under the terms offered by his legal team, Pappas made an immediate payment of $120,000. The plan called for another $50,000 to be wired on Monday and an additional $20,000 by the end of August, for a total of $200,000.

After that, Pappas and/or Creative Pipe would pay $20,000 a month toward the sanctions. Pappas must also close out money he has in offshore banks and bring it back to the U.S.

For a post describing prior events, please click here.

Posted in News Stories

“Too Much Evidence” – Criminal Charges Dismissed

The ABA reports that federal prosecutors have dropped criminal charges against a doctor in a massive online pharmacy case because it has become too costly to pursue the case.  M. McDonough, “Too Much Evidence Cited as Reason for Dropping Drug Charges Against Fugitive Doctor,” (ABA Aug. 17, 2012).  The case involved two terabytes of information and took up roughly five percent of the Drug Enforcement Adminstration’s storage space.  Id.

The ABA article was based on an Associated Press story. R. Foley, “Drug charges dropped because of too much evidence,” (Associated Press Aug. 15, 2012).  Mr. Foley quoted United States Attorney Stephanie Rose: “Continued storage of these materials is difficult and expensive. . . .”  The doctor reportedly fled to Panama.  Id.

Two terabytes is enough to store the text of 2 million novels or roughly 625,000 copies of “War and Peace.’

Id.

Posted in ESI, News Stories

News Report: Mr. Mark T. Pappas of Victor Stanley v. Creative Pipe “Fame” Denied Bail

The Maryland Daily Record reports that Mr. Mark T. Pappas, protagonist in the “Victor Stanley case,” was denied bail “because of his ‘long history’ of noncompliance [with Court orders] and ‘lack of candor’ in the [Victor Stanley] litigation.  Ben Mook, “Back from Belize, Pappas denied bail,” The Daily Record, Aug. 15, 2012.  The Daily Record reports that Mr. Pappas owes more than $3 million in damages and sanctions, and that an arrest warrant “was issued  on Dec. 28, 2011, after he missed court dates and failed to make required payments to Victor Stanley, Inc. . . .”  Id.

Mr. Pappas gained ESI fame in Victor Stanley, Inc. v. Creative Pipe, Inc., 269 F.R.D. 497 (D.Md. 2010)(“Victor Stanley I”), aff’d in part, modified in part,  MJG-06-2662 (D.Md. Nov. 1, 2010), subsequent opinion, 2011 WL 2552472 (D.Md. Jan. 24, 2011)(“Victor Stanley II”),  decision on merits, 2011 WL 4596043 (D.Md. Sep. 30, 2011), appeal pending. 

In short, “Pappas competed against Victor Stanley for site furnishing contracts using the pilfered designs under the trade name ‘Fuvista,’ which Pappas later admitted was short for ‘FU Victor Stanley.’”  B. Mook, “Infringer hauled back from Belize to face civil contempt charges,” The Daily Record (Aug. 13, 2012)

Victor Stanley I chronicled, in the Court’s words, defendant “Pappas’s dogged but unsuccessful attempts to prevent the discovery of ESI evidence against him. . . .”  The Hon. Paul W. Grimm described Victor Stanley I as “the case of the ‘gang that couldn’t spoliate straight.’” In the Court’s words: “Plaintiff [Victor Stanley, Inc.] is fortunate that Pappas’s zeal considerably exceeded his destructive skill and his judgment in selecting confederates to assist in his efforts to destroy ESI without detection.”  The Court concluded that plaintiff had proven “grave misconduct that was undertaken for the purpose of thwarting Plaintiff’s ability to prove its case and for the express purpose of hamstringing this Court’s ability to effect a just, speedy, and inexpensive resolution of a serious commercial tort.”

In Victor Stanley II, the Court summarized Victor Stanley I:

Suffice it to say that Defendants repeatedly failed to comply with multiple court orders compelling the preservation and production of ESI in response to Plaintiff’s discovery requests, and their overall behavior included spoliation of evidence and the failure of Mark Pappas, who controls Defendant Creative Pipe, Inc. and is himself a defendant, to tell the truth under oath during court hearings regarding the spoliation. The prolonged length and enormous breadth and scope of the spoliation and other violations reached a truly extraordinary level. As a result, the Court treated Defendants’ behavior as contempt and ordered Defendants to pay Plaintiff’s associated costs and attorney’s fees, among other sanctions. Specifically, the Court ordered that, “[p]ursuant to Fed.R.Civ.P. 37(b)(2)(C), Defendant shall pay monetary sanctions equivalent to Plaintiff’s attorney’s fees and costs, which will be awarded after further briefing by the parties, and which will include fees and costs associated with all discovery that would not have been untaken but for Defendants’ spoliation, as well as the briefings and hearings regarding Plaintiff’s Motion for Sanctions.”. . . . Additionally, in its Memorandum, Order and Recommendation, the Court stated that “spoliation sanctions shall include costs and legal fees allocable to spoliation. Specifically, as Plaintiff requested, the Court shall award attorney’s fees and costs, including costs related to uncovering Defendants’ discovery abuses; preparing, filing, and arguing all of Plaintiff’s ESI motions; and retaining Guidance Software and Andreas Spruill.”

Thus, in Victor Stanley II, the Court addressed the fees, costs, and expenses to be awarded and wrote “it is hereby ORDERED that relief in the form of payment by Defendants of $1,049,850.04 for attorney’s fees and costs is GRANTED. Defendants already remitted payment of $337,796.37, and shall remit payment of the balance, $712,053.67, to Plaintiff within thirty (30) days of this Order.”

The August 15, 2012, Daily Record reports that:

By December, Pappas had paid $478,409 toward the sanctions, but said he was unable to come up with the balance. He offered to make a $100,000 “good faith” payment and further installments of $20,000 a month, which the court agreed to.

During Wednesday’s deposition, he was questioned about why he had not made the $100,000 payment.

“It was a bad judgment error,” he said. “I should have made it.”

He said he was paid a salary of $190,000 in 2011, while his wife, who also worked for the company, was paid $100,000. He also collected rent from Creative Pipe on office space he owned.

Posted in ESI, News Stories

Book Review: “Zubulake’s e-Discovery: The Untold Story of My Search for Justice,” by Ms. Laura A. Zubulake

Ms. Laura A. Zubulake has published an account of her experiences as the plaintiff in the groundbreaking “Zubulake case.”  The book is entitled Zubulake’s e-Discovery: The Untold Story of My Quest for Justice.

According to Shepard’s, the first decision in that string of decisions, Zubulake v. UBS Warburg, LLC, 217 F.R.D. 309 (S.D.N.Y. 2003), has been cited 760 times.  Ms. Zubulake’s book, however, provides a different perspective.  Written from the bird’s eye view of a lay-plaintiff, it reads like a “whodunit,” presenting an unfolding picture of the e-discovery process from the plaintiff’s chair.

The Zubulake Case: For those unfamiliar with the five published decisions, Ms. Zubulake was a highly-compensated Wall Street executive.  When denied a promotion, she filed an EEOC complaint asserting gender discrimination.  She was then terminated and claimed retaliation. 

In discovery, her former employer failed to produce electronic information which Ms. Zubulake knew and believed existed.  

Rulings on the resulting motions defined a number of key principles involving the triggering, scope, implementation, and monitoring of the duty to preserve electronic information (“ESI”), and sanctions for spoliation.  The decisions are also notable for, among other things, the process of sampling of data on backup tapes and the related cost-shifting analysis. 

The case was tried over two weeks, resulting in substantial compensatory and punitive damages.  It settled prior to appeal for an undisclosed amount.  

Smoking Guns:  Generally, in civil litigation “[e]ach side must trust that the other has not withheld or destroyed the proverbial smoking gun.”  Clear Value, Inc. v. Pearl River Polymers, Inc., 242 F.R.D. 362, 384 (E.D.Tex. 2007)(subsequent history omitted). It has also been suggested by James Layton, Esquire, that “[s]moking guns will not look like smoking guns in the files of someone who knows what he is doing.”  Ms. Zubulake chronicles how she located important withheld and destroyed evidence; made sense out of seemingly innocuous email; and, describes how it was then used at trial. 

When asked why he robbed banks, Willie Sutton reportedly replied: “Because that’s where the money is.” One phrase in Ms. Zubulake’s book illustrates the plaintiff’s electronic discovery strategy:  “Where there was e-smoke, I suspected there would be e-fire.”

In fact, the Court wrote that “Zubulake has produced a sort of ‘smoking gun’,” a message that suggested that the company “exit her asap.”  Her search led to production of additional smoking email, such as: “Thanks. It’s a pity we can’t act on LZ earlier. . . .” 

Thus, Ms. Zubulake wrote: “It took only one resurrected electronic smoking gun to alter the trajectory of my case.” 

Little Known Details: The book contains many interesting factoids. In one of the most important electronic discovery cases of the decade, for example, Ms. Zubulake reported that her “e-mail account was not requested during discovery.” 

And, while one of the significant aspects of the litigation was the adverse inference instruction to the jury, jurors reported in post-trial interviews that the instruction had little, if any, impact on them. 

After the verdict, “[s]omeone asked [the jurors] what role the adverse inference instruction played in the jury’s decision and whether the jury speculated as to what kind of e-mails might not have been recovered. One juror pointed to a binder containing the e-mails entered into evidence. . . .  [The juror] replied that essentially the adverse inference instruction played no role.” 

The lesson Ms. Zubulake draws is interesting.  She concludes that, if the facts were weak, there would have been little or no inference; however, because they were strong, none was needed.  “[T]hey stood on their own.”

Classic Struggle:  On one level, the book is a self-described David-and-Goliath struggle of a single plaintiff against a global corporation.  Ms. Zubulake describes how she budgeted for the lawsuit, imposed stoic restraints on her life-style, embracing a “Spartan existence,” and she describes the personal impact:  “In reality, I struggled to fund the litigation and pay my personal bills.” 

When the Court’s cost-sharing decision was announced, her 25% share came to $40,000, “a staggering sum for an unemployed person,” while UBS Warburg’s share was $120,000, a small fraction of its resources. 

The book graphically explains the impact of routine litigation time lines and processes in this context.  “Unemployed and with a limited budget, every day mattered to me.”

Ms. Zubulake describes her personal isolation as follows:  “Litigation became a very lonely process,” “consuming me,” “demanding total focus,” and “an overwhelmingly debilitating experience. . . . The process became emotional and sometimes malicious.”  She wrote: “Civil action was the quintessential oxymoron; there was nothing civil about it,” and depositions “were a mild but legal form of torture.”

Nevertheless, she concludes: “Perversely, I believed [UBS Warburg’s] size was its Achilles heel.” Given the verdict – $20 million in compensatory and $9 million in punitive damages – that analysis of one impact of asymmetry is noteworthy.    

Retaining Records Rewarded:  On another level, the story provides insight to anyone litigating an employment case. Notably, when Ms. Zubulake began to be concerned about her future at UBS Warburg, she started saving messages and “ultimately preserved hundreds of additional emails, a factor that later proved decisive. . . .”  To “ensure delivery” of some messages, she “blind copied” email to herself and later produced those copies in discovery.  And, she notes that, “[r]ecognizing at the time that I had been wrongly accused of exclusion, I saved copies of e-mails that I continually sent to the Desk updating the progress of the dinner arrangements. I did this because in the event that issue was raised later in the year, I wanted to be able to demonstrate that I did not prohibit anyone from participating.”

It was this survival mechanism that exposed the weakness in UBS Warburg’s  discovery protocol. Ms. Zubulake’s Document Request No. 28 “asked for all documents regarding any communication by, between, or among [UBS Warburg’s] employees mentioning or concerning me.” “Document” was defined to include electronic information. 

UBS Warburg initially produced 100 pages of email, insisting that its production was complete. Ms. Zubulake, however, “was taken aback by the paucity of [UBS Warburg’s initial document] production,” in part because she had printed and retained 450 pages before her termination.  In the Court’s words: “Clearly, numerous responsive e-mails had been created and deleted at UBS, and Zubulake wanted them.”

Lessons for Lawyers: For attorneys handling e-discovery, the book is illuminating:  “E-discovery requires thinking beyond convention.”  For example, Ms. Zubulake discusses the use of an interdisciplinary strategy by emphasizing the value of her unique knowledge of the niche industry involved, the international equity desk on a Wall Street trading floor. She explains: “No one knew key players, events, and practices like I did.”  The need for that interdisciplinary approach, and inclusion of “business people” in the process, is now well-established.  See  Wm. A. Gross Const. Assoc., Inc. v. American Mfrs. Mut. Ins. Co., 256 F.R.D. 134, 135(S.D.N.Y. 2009)(“This case is just the latest example of lawyers designing keyword searches in the dark, by the seat of the pants, without adequate (indeed, here, apparently without any) discussion with those who wrote the emails. Prior decisions from Magistrate Judges in the Baltimore-Washington Beltway have warned counsel of this problem, but the message has not gotten through to the Bar in this District. . . . [A]t a minimum [searchers] must carefully craft the appropriate keywords, with input from the ESI’s custodians as to the words and abbreviations they use. . . .”)(subsequent history omitted).

How Far E-Discovery Has Come:  While in some ways the Zubulake decisions ushered in an era of high-tech litigation, in other ways, the case was decidedly low-tech by contemporary standards.  For example, there were no sophisticated litigation review platforms on the plaintiff’s side and information produced by UBS Warburg was managed using “a [100-page, crude] multi-columned excel spreadsheet listing all documents. . . .” 

At that time, search methodology was still in its early stages.  Ms. Zubulake describes an admittedly naïve keyword search for “Laura,” “Zubulake,” and “LZ,” and concludes that, “[i]n retrospect, my keyword selections were inadequate.” She suggests that “[o]ne person’s professional woman was another’s ‘bitch’; one manager’s termination was another’s ‘exit.’”

While recognizing the advantages of computer-assisted searches, she argues for human input, at least in small cases:  “Relying solely on computer modeling (particularly in small cases) and disregarding the insights of a party or custodian might be cost efficient, but is arguably less effective.  Smoking guns are intended by the originator not to be found.”

Advocating for the Human Touch:  For example, one of the key emails used to demonstrate actual knowledge by the defendant was a reply message that stated only “received, thanks,” and a first name. Ms. Zubulake notes that “[t]his new, three-word e-mail appeared innocuous. However, it provided a missing link” by acknowledging receipt of a facsimile transmission of the EEOC complaint: “The Court later ruled that although the three-word e-mail seemed insignificant in isolation, it was actually quite important.”  It “strongly undercut[]” UBS Warburg’s claim that a key person did not know of the EEOC complaint. 

Would this message have been found by predictive coding?  Ms. Zubulake argues that some “e-mails did not exhibit glaring content or themes that could have been detected by automated search or topic review technology.. . . Individuals wanting to conceal improper conduct were unlikely to use blatantly incriminating language.”

This is, of course, why Jason R. Baron, Esquire, a leader in search methodology, has suggested that “[t]here is no ‘one size fits all’ way to effective search methodology. . . . What is required is a review of available options and analysis of the cost in proportion to what is at stake in the case, with thought given to any shortcomings of the software,” and quality assurance techniques to review false positives and negatives. J. Baron, et al., “Designing a ‘Reasonable’ E-Discovery Search: A Guide for the Perplexed,” in M. Berman, et al., eds., Managing E-Discovery and ESI (ABA 2011), 491-92. 

Nevertheless, Ms. Zubulake’s limited search was successful: “Was the search for electronic evidence worth the time, effort, and money? Yes.  Do I believe that the e-mails made a difference? Absolutely.” 

The “What Ifs”:  Despite the successful verdict, the book points to many “what ifs?”  Due to limited resources and nascent technology, many stones were left unturned.  Mobile and home devices were not searched. Nor was voicemail or social media reviewed.  Selected tapes were unavailable for restoration and “[t]here were [available] back-up tapes that were not  restored and never searched.” Predictive coding was not used. 

In short, the case left Ms. Zubulake to “wonder, what would I have learned if I had discovered all relevant, lost emails?” 

In spite of this doubt, Ms. Zubulake concludes that, “[a]lthough my methods seemingly date back to the Stone Ages, they sufficed.”  She notes that “[w]hat worked for me in 2003 might not be appropriate for the current environment.” In Jason Baron’s words: “What may pass for a reasonable search [today] may be viewed in a few years hence as insufficiently comprehensive or missing a key ingredient. . . .” J. Baron  at 496; see M. Berman, et al.Has Indexing Technology Made Zubulake Less Relevant?,” (ABA Tech. for Litigators). 

A Detailed Account: At points, the book goes pretty deep into the weeds.  As such, it requires a great deal of attention. The factual presentation is complex, with great detail.  On the other hand, this was a lawsuit where the devil was in the details. 

Ms. Zubulake properly describes the importance of the five published Zubulake opinions.  As The Hon. John M. Facciola recently noted: “[W]hen it was finished, Judge Scheindlin, who presided, would forge a revolution in how courts consider and resolve” e-discovery issues.  J. Facciola, “A History of Electronic Discovery,” in M. Berman, et al., eds., Managing E-Discovery and ESI (ABA 2011), 17.

Nevertheless, six years later, The Hon. Shira A. Scheindlin, author of the Zubulake decisions, wrote: “Once again, I have been compelled to closely review the discovery efforts of parties in a litigation, and once again have found that those efforts were flawed. As famously noted, ‘[t]hose who cannot remember the past are condemned to repeat it.’” The Pension Committee of the Univ. of Montreal Pension Plan v. Banc of America Securities, LLC, 685 F.Supp.2d, 456, 462 (S.D.N.Y. 2010), quoting George Santayana, Reason in Common Sense, Vol. 1 of The Life of Reason (1905) (Prometheus Books 1998 at 82).  Despite the “abundantly clear” guidance of the Zubulake decisions, and while Ms. Zubulake correctly concludes that her case “transformed the legal industry and the discovery phase of litigation,” many issues persist.

In closing argument, Ms. Zubulake’s counsel stated: “She stayed within the law.  She lived by the rules.  The defendant did not. . . . The rules were not good enough for them.” 

While that argument was not limited to UBS Warburg’s e-discovery failures, it described them. In the words of Justice Cardozo, “[e]very new case is an experiment.”  B. Cardozo, The Nature of Judicial Process (Yale 1921), 23-24.  “Nothing is stable.  Nothing absolute.  All is fluid and changeable.” Id. at 28.  Ms. Zubulake’s lawsuit proved that.

 * * * *

Laura A. Zubulake, “Zubulake’s e-Discovery: The Untold Story of My Quest for Justice” (CreateSpace 2012)(©Laura A. Zubulake). 

This post is reproduced with permission from Digital Discovery & e-Evidence, 12 DDEE 311, 08/02/2012.  Copyright © by The Bureau of National Affairs, Inc. (800-3732-1033) http://www.bna.com.  There are minor modifications in this post and the original may be found by clicking Book Review: Zubulake’s e-Discovery.

C. Calderone, Review of Zubulake’s e-Discovery

Lee Isaacs, Book Review, Law Technology News

Monica Bay, “Plaintiff Zubulake Publishes Book on Eponymous Litigation,” Law Technoloy News (July 26, 2012).

Posted in Book Reviews, ESI