“Had [outside counsel] fulfilled his obligation to familiarize himself with GFI’s policies earlier, the forensic searches and subsequent motions would have been unnecessary.”
In re A & M Fla. Props.[i]
1.1 What happened?
Two companies agreed to a $41 million real estate transaction. However, before the transaction closed, the sellers refinanced the properties in such a way that the buyer would have to assume the seller’s loans. Litigation ensued, with the buyer claiming this maneuver violated the terms of the deal, and the seller claiming that the buyer knew about this upcoming change all along. As such, email messages between the parties during the transaction became critical. However, in the course of discovery, the buyer and their lawyer repeatedly failed to fully search and produce email evidence, and failed to do so in a timely manner. As such, the court fined the buyer – and its lawyers.[ii]
1.2 What went wrong?
The failure to promptly and comprehensively produce required email evidence in this case appeared to come down to a failure on the part of the buyer’s lawyer to fully understand how his client’s email system worked, i.e., where, how and for long email messages were stored. The lawyer also appeared to have little knowledge about the contents of his client’s email policies. Although responsive messages were eventually produced, final production took over 22 months, and was ultimately the basis for the court’s sanctions. In the court’s view, “while the delays in discovery were not caused by any intentional behavior, [the buyer and their lawyer’s] did not fulfill [their] obligation to find all sources of relevant documents in a timely manner,” and thus sanctions were warranted. In this case, it appears that the delays were exacerbated by a series of issues, including:
- Messages that employees moved to archive and deleted items folders were not initially searched, although such messages remained on the email system.
- The sellers questioned the efficacy of the buyer’s email production efforts, as the sellers had several messages in their possession from the buyer’s employees that the buyers had not produced.
- Even when a forensics expert was hired to conduct further investigation into responsive email, he was not told about the archive folders, and thus did not search them. Subsequent searches of the archive folders revealed thousands of additional responsive messages.
1.3 What can we learn?
The time to learn about the intricacies of your email system is not during litigation. The buyers in this case dodged a bullet of even more severe sanctions including the complete dismissal of the case. Their lack of knowledge about their own email system caused them to inadvertently flirt without outright spoliation, which would not have helped their cause in the face of a judge already tired of the frequent production delays.
We can draw an important lesson from this case. In this example, the sellers produced messages sent to them by the buyer, yet according to the court, the buyer failed to produce those same messages. This understandably raised serious questions about 1) the efficacy of the buyer’s information governance program, and 2) whether or not they were intentionally hiding these messages, as the seller claimed. This teaches us that even small failures in one area of our information governance program can cast all of our efforts in a bad light and reduce the persuasiveness of our case.
Other lessons from this case include:
- Formalize and document. Ensure that the operation of your email system is fully and accurately documented. This includes practices related to the retention, preservation, and deletion of email from the system and related systems including those responsible for backup, archiving, and records management.
- Work with your email experts. Ensure that email administrators provide the information that senior IT management needs to understand the email system, and that this information is understood by counsel.
Email has been a part of our business lives for a long time – at least thirty years. While the basic functionality of email hasn’t changed much since the early 1970s, the way we use it has. From the first tentative, “terse and imperfect” messages sent by Internet pioneers like J.C.R. Licklider[i], to email messages used for effectuating real estate transactions,[ii] executing contracts,[iii] firing employees,[iv] filing documents with regulators,[v] and thousands of other business functions, email is an essential part of how do business.
And yet, we still haven’t figured it out.
For most of us, if the email stops, the work stops. However, many of us still treat email messages as the second-class citizen of our information governance program – ignored, tossed, unmanaged. Nowhere is this gap more obvious than in the courts. Here, our email failures become very real and very painful – laid out for the world to see in the harsh black and white of court opinions, media coverage, and the relentless and ruthless blogosphere. The courts are where our Friday afternoon meeting-room discussions and head shaking about the out-of-control email system; about how so-and-so has email messages going back to the 90s; about how we should really do something about all those email backup tapes; take on a new and painful dimension.
In the past few years there have been some blockbuster cases involving email – large enough, one hopes, to gain the attention of senior managers in every industry. These cases, such as Judge Scheindlin’s series of Zubulake decisions[vi] and her recent Pension Committee opinion,[vii] set new standards for the way we manage email and other information. Others, like Coleman Holdings v. Morgan Stanley[viii], attracted attention for their eye-popping monetary sanctions.
In the coming weeks, I am going to write about some of these cases, and what they teach us about email management and information governance.
The cases I have chosen to focus on are not important because they are exceptional. Rather, they are important because they are commonplace.
Today, looking for cases that speak to email management issues is like dipping your hand into a river. Every day you can find email management issues being considered by a court, regulator, auditor, or other “finder of fact” in jurisdictions across the globe. The cases I’ve selected are designed to illustrate key points about email management, and to illustrate the intensity and depth to which email issues are considered by the court today. The intention of discussing these cases is not to embarrass or single out a particular institution. In fact, given the plethora of email-related challenges occurring daily before the courts, it would be difficult to make the case that any particular organization’s failings are unique. Instead, the purpose of examining these cases is to glean important lessons for all of us about email management.
Case Number 1: Producing email may be hard, but do the courts care?
“It seems to me that a ‘costs, time and effort’ argument involving email is the same as when hard copy documents are in issue. For example, the cost, time and effort to produce hard copy documents which are disorganized or stored in various places could also be considerable.”
GRI Simulations Inc. v. Oceaneering International Inc.[ix]
Key employees of a global engineering firm accepted employment offers from a competitor. When they left the firm, their employer alleged that they took proprietary software and other intellectual property with them, thereafter using it to help the competitor build a new product, resulting in $8 million in damages. In the ensuing litigation, email messages formed a critical part of the evidence. However, the defendants argued that they should not have to produce their own email messages because it would be too “time consuming” and “expensive.”[x] The court disagreed.
What went wrong?
When it came time to search, find, and produce email messages responsive to the litigation, the defendants found their email system lacking. Not only did the system make it “inherently difficult to conduct email searches,” but searching archived email was not possible without physically accessing each archive location across the globe. As a result, the company stated that it, “may be difficult to ensure that all archives are searched.”
Furthermore, a company lawyer testified that she couldn’t explain why email messages sent to several employees were found in the mailboxes of some employees, but not all.
As a result of all this confusion and difficulty surrounding email, the defendants argued that they should not have to produce responsive email. The judge disagreed, writing that organizations shouldn’t expect special treatment around email discovery simply because information is in email form: “it does not appear to me that searching email archives . . . is inherently more onerous or expensive than conducting manual searches for hard copies of documents. In fact, it could be easier.”[xi] That is, if the email is well-managed, which the court apparently believed was not the case here.
What can we learn?
Judging by surveys like AIIM International’s email management “Industry Watch,” which found that a majority of respondents have little confidence in their email program,[xii] most organizations have a long way to go when it comes to email management. Although the business cost of email mismanagement may be hidden, or accrue slowly, email management flaws quickly take center stage in litigation.
There are several lessons to be learned from this case, including:
- Local email archives. Don’t allow employees to create local archives of email (AIIM’s survey found that almost half of organizations have no policy on this topic). Turn off the ability to create .pst and .nsf files., and look for smart technology like content analytics to help you clean up the ones that you already have.
- Don’t expect mercy for bad email management. Don’t expect the court to take mercy on you because you have been doing a poor job of managing your information. Email has been around for over three decades. That’s a long time to get it figured out. Courts and regulators in all jurisdictions are demonstrating diminishing patience with organizations that do not take email management seriously.
- Is your email system e-discovery-ready? Is your approach to email management and archiving e-discovery ready? In other words, could you easily and quickly conduct searches across the entire system for all email messages generated by specific employees, or containing specific keywords? The AIIM survey found that 45% of organizations allow employees to keep email in personal folders – “unshared, possibly un-findable and at considerable risk of random deletion.”[xiii] Remember, you may need to be able to do this for all email, even the stuff hanging around in decommissioned email systems, file servers, backup systems, and so on.
[i] “One could write tersely and type imperfectly, even to an older person in a superior position . . . and the recipient took no offense. The formality and perfection that most people expect in a typed letter did not become associated with network messages [e-mail], probably because the network was so much faster, so much more like the telephone.” J.C.R. Licklider, Albert Vezza, Applications of Information Networks, Proc of the IEEE, 66(11), Nov 1978.
[ii] For example, in the case of Shattuck v. Klotzbach, 2001 WL 1839720 (Mass. Super., Dec. 11, 2001), where a $2 million real estate sale was negotiated via email. The seller sued the buyer to enforce the contract, and the court found that the email messages satisfied the legal requirement for “a writing” and the typed names at the bottom of the email messages constituted a signature.
[iii] See, for example, Stevens v Publicis S.A., 2008 NY Slip Op 02880 [50 AD3d 253], where a New York appellate court ruled that “emails were signed writings that modify contract.” Coverage at, Kelly O’Connell, “U.S. Court Decides Email Equal a Signature for Contracts,” IBLS, May 2, 2101. Online at, http://www.ibls.com/internet_law_news_portal_view.aspx?s=latestnews&id=2032 See also, Stevens v. Publicis, S.A. and JSO Assocs. Inc. v. Price.
[iv] See, for example, “Radio Shack Lays off Employees Via E-Mail,” Associated Press, March 2, 2007. Online at, http://www.usatoday.com/tech/news/2006-08-30-radioshack-email-layoffs_x.htm
[vi] The most recent of the five decisions being, Zubulake v. UBS Warburg, 2004 WL 1620866 (S.D.N.Y. July 20, 2004).
[vii] Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, (S.D.N.Y. Jan. 15, 2010).
[viii] Coleman (Parent) Holdings, Inc. v. Morgan Stanley & Co. Inc., 2005 Extra LEXIS 94 (Fla. Cir. Ct. Mar. 23, 2005).
[ix] GRI Simulations Inc. v. Oceaneering International Inc., 2010 NLTD 85 (CanLII).
[xii] “Over half of respondents are ‘not confident’ or only ‘slightly confident’ that emails related to document commitments and obligations made by staff are recorded, complete, and retrievable. “AIIM Industry Watch-Email Management: The Good, the Bad and the Ugly,” AIIM International, May 2, 2009. Online at, http://www.aiim.org/Research/Email-Management.aspx
[xiii] “AIIM Industry Watch-Email Management: The Good, the Bad and the Ugly,” AIIM International, May 2, 2009. Online at, http://www.aiim.org/Research/Email-Management.aspx