‘Monumental’ lapse

Characterizing a company’s e-discovery violations as “monumental,” a federal judge in California recently imposed $8.5 million in sanctions, yet again demonstrating that in-house counsel must actively assess efforts by their companies to produce requested electronic documents.
The hefty sanctions for failing to monitor and report e-discovery failures – as well as the judge’s unusual referral of the lawyers to the state bar for possible disciplinary action – triggered a small panic among attorneys in the wake of the ruling.
However, despite “the-sky-is-falling” pronouncements, experts say lessons from the case are likely less dramatic than that.
“The case is not the least bit typical, but the range of issues for litigators to think about and talk about are typical,” said Timothy Devine, a partner with Honigman Miller in Detroit.
In particular, the case highlights why in-house and outside counsel must openly address their respective responsibilities in the e-discovery process.
In a unique move, the judge in Qualcomm v. Broadcom (No. 05cv1958-B) ordered Qualcomm’s in-house attorneys and outside counsel to submit to a court-supervised e-discovery protocol, which she called “a baseline in other cases.”
“[The judge] is saying you can’t just take a client’s word that they searched their computers,” said Mary Mack, technology counsel with Fios, Inc., which provides corporate litigation response plans.
(You can read the full opinion in the “important documents” section at www.newengland inhouse.com.)

‘Monumental discovery violation’
The case involved a dispute over digital video signals. In its defense, Broadcom argued Qualcomm had waived its patent infringement claim by virtue of participating in an industry-wide collaboration that resulted in a video coding standard.
Qualcomm denied it participated in the code-setting effort during the time period it claimed its patents were infringed.
However, after discovering 21 e-mails suggesting it did participate in the industry collaboration at the relevant time, Qualcomm failed to produce them or investigate whether more e-mails existed – while also maintaining its argument in court that it took no part in the standards-setting body and no e-mails existed.
In the end, more than 46,000 e-mails were found that had not been produced.
U.S. Magistrate Judge Barbara Major called it a “monumental discovery violation” and sanctioned six of Qualcomm’s outside attorneys for “ignoring warning flags” and not making a “reasonable inquiry” into whether the company’s document production, including reasonable search terms, was adequate.
“An adequate investigation,” the judge wrote, “should include an analysis of the sufficiency of the document search and, when electronic documents are involved, an analysis of the sufficiency of the search terms and locations.”
The court ordered Qualcomm, which lost the patent suit, to pay all of Broadcom’s attorneys’ fees and costs of over $8.5 million and referred the sanctioned attorneys to the state bar for investigation of ethical violations.
The judge also ordered the six sanctioned lawyers and Qualcomm’s five in-house attorneys to complete a “Case Review and Enforcement of Discovery Obligations” (CREDO) protocol that requires them to analyze their discovery failures, develop a comprehensive e-discovery protocol to prevent future violations, and apply the protocol to various factual situations – such as when the client has no in-house counsel, one in-house lawyer, a large legal staff, or two outside law firms.
In addition, Qualcomm must pay for Broadcom’s lawyer to participate in the meetings with the judge, which began Jan. 29.
Judges are increasingly taking an active role in the e-discovery process, said Mack, noting that a magistrate judge in Kansas required attorneys to videotape their “meet and confer” conference (a required meeting under new federal rules), so he could watch it before he decided on their respective e-discovery proposals.

Preventing an e-discovery disaster
The Qualcomm case reinforces the point that the more a company waits on proactively addressing e-discovery, the more it is likely to cost them.
According to a recent Aberdeen survey of 364 companies, those that implemented a comprehensive e-discovery strategy experienced a significant cost savings and lowered litigation risks.
Preventative steps to avoid an e-discovery disaster are discussed below.
Records policy. Although most companies have a records retention policy, not enough are robustly enforcing it, said Devine, especially when it comes to work-related information on home computers, Blackberries or other devices used off-site.
It’s important for outside counsel to communicate with the in-house legal team as well as the in-house IT people to make sure they are getting the policy “from the horse’s mouth,” said Michael Hindelang, an attorney in Detroit and expert in e-discovery.
“By doing it upfront, you avoid a lot of the pressure when litigation hits,” said Devine.
Content map. Another basic feature of an e-discovery plan is a content map that lays out where all the content is and who is responsible for it, said Mack.
“The content map tells you, my accounting is over here, my e-mails for this division are over there, my retention period is ‘x,’ the person to issue a legal hold is Joe Smith and his e-mail address is this,” she explained.
The value of in-house counsel is underscored because they are in a position to assess various “risk points” of the business as it changes – such as acquiring a new affiliate and incorporating the two retention policies, or dealing with electronic data stored on computers when a plant is closed or a business is sold or employees are laid off, said Hindelang.
Get surgical. A mistake some lawyers make is “save everything, review everything and produce everything,” said Devine. “That’s the wrong answer.”
Lawyers should be more precise in their electronic discovery, not broader in their responses.
A developing trend is for opposing lawyers to negotiate search terms for electronic data, said Kansas City commercial litigator Maxwell Carr-Howard, who recently did just that in a recent case he handled involving a corporate investigation by the Department of Justice.
Collaboration. The case sends a strong message for in-house and outside counsel to strengthen their collaboration.
“It may mean that the process becomes more formalized in the guidelines as to the different people’s roles and responsibilities,” said Charles R. Morgan, former general counsel of Bell South and currently managing director and special counsel for FTI Consulting in Atlanta.
This includes outlining “touch points for communications” when litigation does happen, said Mack.
However, she said the ruling adds friction to the relationship between in-house and outside counsel because outside counsel in the case were denied a request to breach the attorney-client privilege once they faced sanctions.
“Some outside counsel will request when they are retained a waiver of the privilege if their work is questioned, and in-house counsel should be looking closely at their engagement letters,” she said.
But Carr-Howard said this would be very hard to do without immediately undermining the trust between the attorney and client.