All About Information

The Globe and Mail’s Law Page from this morning covers a January 31 decision of the Federal Court in which Madam Justice McTavish set aside a production order obtained by the Commissioner of Competition. She held the Commissioner, who obtained the order under section 11 of the Competition Act by way of an ex parte application, did not make a full and frank disclosure of material facts and made statements that bordered on misrepresentations.

There were three specific bases for McTavish J.’s decision. First, she held that the Commissioner ought to have disclosed a statement it had made in a previous section 11 application that the order obtained on that application would likely be sufficient for its inquiry-related purposes. Second, she held that the Commissioner provided “misleading, inaccurate and incomplete” information on the extent of the overlap between the information it sought and information it already had. Third, she held that the Commissioner ought to have drawn the concerns brought to her attention by the respondent earlier in the year in response to a previous and similarly-broad production order in the same inquiry. Most notably, the respondent had complained that the previous order was so burdensome that its process of retrieving documents had caused its file server to crash and likely involved data restoration costs exceeding $500,000.

The decision stresses the strict burden of disclosure on parties seeking ex parte orders for production, whether in the regulatory or civil context. The part about disclosing expressed concerns about the burden of retrieving electronic documents may apply in a limited number of situations because an ex parte process often starts the course of inquiry or investigation, but it is nonetheless significant given the broader challenges associated with managing the retrieval and production of electronic documents.

The Globe also has commentary by Davies Ward lawyers John Bodrug and Anita Banicevic, linked here. This is part of a recent run of cases on transgressions by regulators related to the seizure of documents. See, for example, my coverage of the Nova Scotia Appeal’s recent decision on a Canada Revenue Agency search here and the Ontario Superior Court of Justice’s December 2007 decision on a Ministry of Labour search here. (Full reasons are still pending in the latter case.)

The Commissioner of Competition v. Labatt Brewing Company Limited, 2008 FC 59.

On January 18, the Nova Scotia Court of Appeal issued a significant judgement on Crown liability for costs on an application to quash a search warrant.

The Court held that the Crown in Right of Canada ought not to be liable for costs of on an application to quash an “ill-conceived and poorly executed” search warrant obtained and executed by the Canada Revenue Agency. It reached this conclusion because a Crown Attorney was not involved in the impugned investigation but, rather, had simply responded to the application to quash.

The Court also said that it did not matter the CRA is a deemed agent of the Crown under the Canada Revenue Agency Act because the basis for an award of costs is rooted in the special role of the Crown as prosecutor:

The basis of this general rule is not that the prosecutor might be an agent of the Crown and that an investigator might not be. The general rule is not based on the law of agency, but on strong reasons of public policy which I have already described, and which have been set out in the cases on many occasions: see, for example, Foster, supra at ¶ 62-65; and Ciarniello, supra, at ¶ 31-36. Whether by virtue of ss. 4(2) of the CRAA, the investigator here was or was not an agent of the Crown (a point I need not decide) does not change the general legal principle applicable to costs against the Crown in criminal matters.

The underlying facts involved a search based on a flawed Information and in which the CRA had seized records subject to solicitor-client privilege contained on computer and electronic storage devices.

R. v. Taylor, 2008 NSCA 5.

The Sedona Canada Principles were launched yesterday and are available on LexUM’s E-Discovery Canada portal (now RSS enabled!). The Principles should play an important role in advancing e-discovery practice in Canada.

On December 5th, a 2-1 majority of the Supreme Court of Ireland held that it was not improper to order a defendant to create and produce a special report from a database. However, a separately constituted majority held that, in the circumstances, the costs of such an order would be disproportionate to its benefit until and unless the plaintiff proved the defendant was liable.

The impugned order was made in the context of a competition law dispute. The plaintiff was a domestic seller of calling cards who claimed that the defendant network owner engaged in a discriminatory pricing practice that favoured foreign providers. It requested production of records of specific calls from one or more archived database files in order to prove liability and damages.

The parties argued the merits of the production request in light of another set of records that was also ordered to be produced. When it became apparent that the disclosure of the other set of records would not provide evidence the plaintiff felt it needed to meet its burden of proof, it pressed for production of the call records. The defendant only then strongly raised its proportionality concerns and made a factual admission which it claimed would render production unnecessary. It also claimed that the impugned order would require it to compile, analyze and present information in a form in which it never existed.

The defendant ultimately prevailed at the Supreme Court based on its proportionality argument. Fennelly J. and Kearns J.’s reasoning arguably turned on the plaintiff’s factual admission, which they held made production unnecessary to proof of liability and disproportionate in light of the cost of production (claimed to require the purchase of hardware costing approximately of €150,000 and significant other cost outlays to be made over a six month period). Both recognized the potential necessity of production to proof of damages, and held that the plaintiff may file a fresh application for discovery should it first prove liability. In reaching his finding Fennelly J. said:

I have come to the conclusion that the very unusual burden and heavy cost of the discovery in this case requires the Court to have a clear view of the litigious benefit to the plaintiff from obtaining the extremely detailed breakdown of information which is the only remaining issue.

Geoghegan J., dissenting on the proportionality issue, took the opposite view on the burden of proof, making comments that favoured a strict burden of proving disproportionate costs once evidence is shown to be relevant and necessary. He noted that the defendant had raised cost as a barrier to production well into the dispute and then had argued cost in its submissions without adducing supportive evidence. He said:

My overall impression is that essentially, the appellant was trying unsuccessfully to frighten the court by the mention of what superficially at least would be large figures but figures unsupported by solid evidence.

While the bifurcation of production in response to cost is novel and the dispute on burden of proof significant, the Court’s treatment of the “creating records” issue was dealt with on a more broadly-reasoned basis. Fennelly J. endorsed Geoghegan J.’s reasoning, and Kearns J. did not make comment. Geoghegan J. reasoned that the form in which data is stored is not relevant to the form in which its produced. He said:

It is common knowledge that a vast amount of stored information in the business world which formerly would have been in a documentary form in the traditional sense is now computerised. As a matter of fairness and common sense the courts must adapt themselves to this situation and fashion appropriate analogous orders of discovery. In order to achieve a reasonable parity with traditional documentary discovery it may well be necessary to direct a party “to create documents” within the meaning of the notice of appeal. It may indeed also be necessary to direct a party “to create documents” within the meaning of the notice of appeal even if such “documents” “do not exist at the time the order is made”. I am deliberately using quotation marks because I do not intend to adjudicate on the quasi-metaphysical argument of Mr. Paul Anthony McDermott, counsel for the respondent, that the “documents” do in fact “exist”. At any rate that matter can probably be argued both ways but I would be firmly of opinion that an order of discovery can be made which involves the creation of documents which do not exist, made in the kind of context in which it is sought in this case. Otherwise, potential litigants could operate their business computers in such a way that they would be able to evade any worthwhile discovery. In expressing the above views, I accept that superficially I am perhaps going a step further than the English authorities have done in so far as their rule of court can apparently be interpreted to cover computer discovery. I have no hesitation, however, in making that extension.

Dome Telecom v. Eircom, [2007] IESC 59.

As I’ve said, there will be lots of commentary about the Qualcomm v. Broadcom case from Americans, and I’d rather leave it to them than wade in myself. So this is just a teaser for those who are unfamiliar with the issue. I’ve also provided some links below if I’ve managed to pique your interest.

The order, released on Monday by a California court, brought an end to an intense dispute about failure to produce relevant e-mails that began this January 26th when a witness for Qualcomm in a patent dispute admitted that she had received e-mails from a mailing list (called the “avc_ce” list) which was evidence of Qualcomm’s participation in a standards setting body (called “JVT,” on the “H.2264″ standard) before a specific point in time. In the Court’s words, Qualcomm’s assertion that it had not participated in the JVT was “vital” to its success in defeating Broadcom’s waiver argument, and two days after the admission was made a jury returned an advisory verdict that claimed two of Qualcomm’s patents were unenforceable because of waiver.

After the trial Broadcom asked Qualcomm to conduct additional searches to determine the scope of its discovery violation, and eventually Qualcomm agreed to search the current and archived e-mails of its five witnesses based on the terms “avc_ce,” “JVT,” and “H.2264.” Then, in April, Qualcomm’s general counsel and the lead counsel at trial wrote the trial judge to apologize for failing to produce relevant documents.

Qualcomm eventually located over 46,000 responsive and undisclosed records by searching the e-mail archives of 21 employees. Then…

• …Broadcom filed a motion for sanctions
• …Qualcomm’s lawyers were ordered to show cause why they should not be sanctioned
• …Qualcomm came into conflict with its lawyers about who was responsible and refused to waive its solicitor-client privilege for use by the lawyers in the show cause
• …which all led to the recent order.

This week Magistrate Judge Barbara L. Major held that both Qualcomm and six of its attorneys committed misconduct, focusing on the failure to conduct an e-mail search on obvious custodians on obvious terms on an issue that was obviously central to the case. She ordered Qualcomm to pay over $8.5 million for Broadcom’s attorneys’ fees and other litigation costs (less costs ordered to be paid earlier), referred six lawyers on Qualcomm’s litigation team to the State Bar of California for investigation and ordered these lawyers and some of Qualcomm’s in-house lawyers to participate in a program to craft a model case management protcol to prevent similar events in the future. It appears this protocol - deemed the “Case Review and Enforcement of Discovery Obligations” or “CREDO” protocol - will become a public source of guidance. The Court said:

While no one can undo the misconduct in this case, this process, hopefully, will establish a baseline for other cases. Perhaps it also will establish a turning point in what the Court perceives as a decline in and deterioration of civility, professionalism and ethical conduct in the litigation arena. To the extent it does so, everyone benefits - Broadcom, Qualcomm, and all attorneys who engage in, and judges who preside over, complex litigation. If nothing else, it will provide a road map to assist counsel and corporate clients in complying with their ethical and discovery obligations and conducting the requisite “reasonable inquiry.”

Here is a copy of the order and here are some links to the early comments and articles:

• Jeff Beard
• Zusha Elinson and Dan Levine (@ Law.com on January 8th)
• Zusha Elinson (@ Law.com on January 9th)
• K&L Gates
• Wall Street Journal Law Blog

In a case you’ll hear lots more about over the next while, Law.com reports that a decision in the Qualcomm case, in which Qualcomm’s litigation team was sanctioned for discovery violations, was released yesterday. The article is here.

Back to work and excited about a fresh year ahead. On a personal note, Hugo’s eight months old and addicted to pulling himself to a standing position, and I was very pleased to manage a two hour paddle today on Lake O with five degree temps., not a breath of wind and nobody in sight. Here’s what I’ve been reading lately.

• Randall Stross, How to Lose Your Job on Your Own Time. An article on internet identities and employment duties. (New York Times)
• Rob Robinson, Compliance 2008, Do You Know What Your Employees are Doing? Outlines new web based software applications that may allow employees to perpetrate informational mischief. (Information Governance Engagement Area)
• Conrad Jacoby, Discovery of Employee-Owned Computer Equipment. If you’re a regular reader of this blog, you may understand that the storage of work documents on employee home computers is my favorite Bugbear. This article discusses another reason for employers to clamp down - risk and cost reduction in e-discovery. (Internet Business Law Services)
• Craig Ball, Ask and Answer the Right Questions in EDD. Craig Ball is another of my favorite commentators. Here, he lists 50 questions to consider at the outset of litigation and in meet and confer meetings. (Law.com)

I pick up a significant number of my regular reads from Rob Robinson’s Information Governance Engagement Area. Please check him out if you haven’t done so yet.

Here’s a new feature that I’ll resolve to keep with for the next while. Every one or two weeks I’ll post a handful of articles or blog posts that have caught my interest and are related to the subject matter of this blog. Here are some from my holiday readings (in no particular order):

• Alan Taneja, Buying typical storage for video surveillance? Rethink that! A nice synopsis of new records management issues associated with video surveillance.
• David Hecheler, Lockheed Employee’s YouTube Video Sounds Ethics Alarm. A thorough account of the story of whistleblower Michael DeKort.
• Ron Ashkenas, Simplicity-Minded Management from the December 2007 Harvard Business Review. About simplifying business structures, products and business processes. The processes part has a bit about information management, which reminded me of a comment that came up in a recent conversation with a friend of mine who’s a GC. It went something like, “The mass of available information and the pace of business is leading to a crises of quality decision making.” I like this topic.
• Kelly D. Talcott, Cutting out Privacy in the Office. Locking down work e-mail systems, the subject of this article, is a hugely important issue. I’d like to thank my managing partner, Stephen Shamie, for passing this one on.
• Joe Bartling, Post-Termination Employment Forensics. Very prescriptive blog post on an important topic.
• Ralph Losey, Best Buy Wins Key e-Discovery Ruling in Fraud Case. Here’s Mr. Losey’s summary of the much-discussed Best Buy Stores L.P. v. Developers Diversified Realty Corp. e-discovery award, a case on the duty to preserve a litigation database that is likely to be useful in subsequent litigation.

Enjoy!

On December 3rd, the Alberta Court of Queen’s Bench dismissed a motion for more fulsome production, finding the applicant failed to discredit the respondents’ keyword search protocol.

The dispute centered on a set of 50,000 records that were identified and collected in a related action. The respondents reviewed 15,000 of the records manually and conducted a keyword search on the remaining 35,000. This process resulted in a set of 110 records that were produced.

The Court cited the “Ontario e-Discovery Guidelines” and its Principle 10, which endorses the use of electronic tools to identify information and records of arguable relevance. It held that the applicant had the burden of proving the inadequacy of the search protocol, held that it would be improper to draw an inference about the quality of the search from the number of records produced and held that the applicant did not otherwise prove inadequacy. In reaching this conclusion, the Court suggested that the applicant ought to have challenged the protocol more vigorously in its cross examination or ought to have called expert evidence with the same intent.

Shell Canada Limited v. Superior Plus Inc., 2007 ABQB 739 (CanLII).

On November 23rd, the Ontario Superior Court of Justice set aside an Anton Piller order in favour of a preservation order.

The Court held that the plaintiff had failed to prove a real possibility that the defendant would destroy incriminating documents or things and, alternatively, that the scope and quality of the electronic records seized weighed against the order. There are significant parts to both findings.

On the possibility of destruction finding, the Court rejected the plaintiff’s argument that the impermanent nature of arguably relevant electronic evidence justified the Anton Piller. Although not entirely clear from the award, the plaintiff appears to have argued that records of web-browsing were relevant and that the search was necessary because web pages and IP log files stored in memory and swap files would be subject to loss in the ordinary course. The Court said:

This evidence does not support an allegation of intentional destruction of evidence, to justify the court’s interference. It does not tell the court when evidence may be lost by use of computers in the ordinary course of business. Inadvertent over-writing of files by on-going use of computers could be addressed by a demand to preserve evidence.

The Court was also not impressed with the plaintiff’s execution of the order. For one, it seized a home computer belonging to a personal defendant without authorization. More fundamentally, the Court took issue with scope of the order itself (citing Celanese for the proposition that the scope of the order should be as narrow as possible) and the fact that it enabled the plaintiff to seize virtually all of the defendant’s records. It said:

The scope of documents seized under the order is breathtaking. It includes documents that are personal in nature, such as private e-mails unrelated to the Wasaya workplace, individual banking records, income tax returns, personnel files, patient’s medical records, and other materials that have no relevance whatever to the allegations NAC makes in this litigation. It also includes confidential business records such as financial statements for Wasaya, marketing plans, restructuring plans and other documents bearing on Wasaya’s market position as NAC’s competitor. Documents related to other litigation involving Wasaya, and protected by solicitor-client privilege, were also caught in the net.

In the result, the Court substituted a non-specific order to, “preserve documents relevant to the issues in this litigation and to produce such documents as may be required in accordance with the Rules of Civil Procedure.”

NAC Air, LP v. Wasaya Airways Limited, 2007 CanLII 51168 (Ont. S.C.J.).