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Case Summary, Lafarge North Amer.; Accusations of Spoliation and E-Discovery Experts

Posted by rjbiii on April 5, 2010

United States Gypsum Co. v. Lafarge North Am. Inc., 670 F. Supp. 2d 768 (N.D. Ill. 2009)

Background: Plaintiffs US Gypsum Co. (USG) claim that Defendants Lafarge North. Am. (Lafarge) infringed USG’s patents and stole confidential information relating to wallboard manufacture.
Procedural Status: The court considers motions by each party to exclude the testimony of the other party’s forensics expert.

Basic Points:

  • A witness may be qualified as an expert by knowledge, skill, experience, training, or education.
  • An expert witness may testify to those areas within his expertise, which may include areas closely associated with or encompassed in general by their subject of expertise, even if not explicitly stated in their credentials.
  • An expert witness may not testify to the state of mind of actor’s without specific qualification, or based on speculative means.
  • Accusations of spoliation based on speculation are barred from admission
  • Criticisms on one expert’s methodology based solely on a study of that methodology, and absent an independent study, are admissible to the extent the criticisms are based on expert-level knowledge and not speculative means.

Admissibility of Expert Testimony in General:

Under FRE 702, a witness can be qualified as an expert by “knowledge, skill, experience, training, or education. Courts consider a proposed expert’s full range of practical experience as well as academic or technical training when determining whether that expert is qualified to render an opinion in a given area.”

The court stated that the admissibility of expert testimony depends not only on the witness’s qualifications as an expert. Under Daubert, court’s are to consider the following factors, among others that may present themselves:

(1) whether the expert’s technique or theory can be or has been tested–that is, whether the expert’s theory can be challenged in some objective sense, or whether it is instead simply a subjective, conclusory approach that cannot reasonably be assessed for reliability;
(2) whether the technique or theory has been subject to peer review and publication;
(3) the known potential rate of error of the technique or theory when applied;
(4) the existence and maintenance of standards and controls; and
(5) whether the technique or theory has been generally accepted in the scientific community.

The court must ensure, therefore, that the proffered testimony has, at its core, some reliable basis. The testimony must also be relevant, so that it assists the trier of fact in understanding the evidence or in determining a fact in issue.

Testimony of Carl Florez:
Carl Florez was retained by Plaintiffs to testify to the security measures undertaken by USG to protect its proprietary information.
Upon examining Mr. Florez’s qualifications, it concluded that he was a qualified expert in the areas of computer forensics and investigation. In his expert reports, Mr. Florez offered a list of “reasonable” measures a company might take to protect its confidential information, and then compared them to the measures implemented by USG. He concluded that “USG’s efforts to protect the secrecy of its proprietary and confidential information, including the information that is electronically stored, are more than reasonable, and are among the most thorough I have encountered in my experience.”

Defendants Lafarge, contended that Florez is not qualified to render an opinion regarding the steps USG took to protect its confidential information. While acknowledging Florez’s knowledge and experience in the areas of computer forensics, defendants argued that has no apparent expertise in the steps necessary to protect the secrecy of information. Florez’s opinions on these matters are, therefore, unreliable.

In beginning its analysis, the court stated the following rule: whether a witness is qualified as an expert can only be determined by comparing the area in which the witness has superior knowledge, skill, experience, or education with the subject matter of the witness’s testimony. Florez has gained expertise and familiarity with how breaches occur, including the measures and countermeasures used to protect information and to overcome protections. Efforts to protect information and efforts to access confidential information evolve on parallel tracks, such that a person familiar with the challenges of accessing protected information will also be familiar with steps necessary to protect it. Florez’s unique familiarity with computer crime provides him with an understanding of computer security measures. The court concluded that Florez’s testimony passed the test.

Defendants also argued that Florez’s opinion with respect the reasonableness of USG’s data security measuares rested on an unreliable method. Again, the court disagreed. Florez’s failure to undertake a specific experimental analysis in reaching his opinion does not, by itself, require the court to exclude his testimony. Indicators of reliability depend on the particular circumstances of the particular case at issue. Determining whether a particular activity is reasonable in light of other facts is often a function of experience, of which Defendants admit Mr. Florez has a sufficient measure. The court was persuaded that in this case, experience provided a reliable basis for determination of what precautions are reasonable and effective to prevent breaches

Reasonable Measures Cited by Mr. Florez:
Florez cited and expounded on five “generally accepted measures” for protecting electronic information:
(1) establishing and communicating protection polices;
(2) need-to-know distribution of confidential information;
(3) marking information as “confidential” or “proprietary”;
(4) maintaining confidentiality agreements; and
(5) controlling access to information with physical or electronic systems.

In the context of forming his opinion, Florez consulted authoritative sources and publications in the field. He also compared USG’s policies with those at several other organizations he was familiar with, including the FBI. Defendants suggested that these comparisons are inadequate because none of these organizations is in the manufacturing business or construction industry. While the court acknowledged that discussion of confidentiality measures in the manufacturing setting might have been useful, its omission was not fatal, as the need for security in manufacturing sector here cannot be greater than that present at the FBI. The court concluded that Florez’s opinion appeared reasonable, even in the face of his inability to cite specific sources of information used for his analysis.

Mr. Florez’s Analysis of the Intent of Actors:

The court did agree with Defendants assertions that where Mr. Florez made oblique references to the state of mind of certain actors, he appeared to exceeded the scope of his expertise. The court noted that nothing in the record suggested that Florez was particularly qualified to understand the mental attitudes of others. Even assuming he were, he is able to render an opinion on intent only by drawing inferences from the evidence. Such opinions merely substitute the inferences of the expert for those the jury can draw on its own. Thus, the court excluded this type of testimony from the case.

Mr. Florez’s Analysis of Document Spoliation:

In his reports, Florez opined that various Defendants committed intentional acts of spoliation to cover up the misappropriation of USG documents. In an earlier opinion, the court had barred USG, its attorneys and witnesses from offering evidence of any alleged spoliation of evidence by any of the Defendants . . . and precluding all comment or testimony on such matters in the presence of the jury, either directly or indirectly, at any stage of trial from jury selection to verdict. Plaintiff now sought to use Florez’s testimony to explain “what steps were taken resulting in deletion of the documents, how partial information was recovered, and what information is irretrievably lost.”

The court was not persuaded to change its view on the matter of accusations of spoliation. The opinion stated that plaintiffs implicitly conceded that the main purpose of Florez’s testimony was to create the inference that Defendants intentionally destroyed evidence in an attempt to cover up alleged wrongdoing. Because plaintiffs offer no new non-speculative evidence on the issue, the court prohibited all testimony of this type.

Testimony of Andrew Reisman:

Mr. Reisman opined primarily on the validity of Florez’s methods and conclusions, contending that the evidence Florez reviewed failed to establish his subsequent findings. Mr. Reisman conducted no independent investigation or data analysis, but rather he reviewed Florez’s reports and consulted the same data Florez did. Plaintiff suggested that Reisman was obligated to undertake a broader investigation because he “had unfettered access to the entire Lafarge computer network” and concludes that the failure to do so constituted cherry-picking data in a way that fatally undermined the reliability of his conclusions. Defendants respondrf that Reisman would testify, based on his own experience, to “what forensic analysts do, what information they look at, what conclusions they can reach, and what conclusions they cannot reach based on forensic evidence.”

The court concluded that Reisman’s methodological criticisms were sufficiently based on his relevant experience to be reliable, and because computer forensics is a highly complicated area, the jury would benefit from having access to criticism from another expert in the field. However, to the extent that Reisman’s opinion offers speculation with respect to the use or dissemination of USG information at Lafarge, in the guise of criticizing Florez’s methodology, such testimony will be excluded.

The court ruled that any comments from Reisman that appear to divine an actor’s intent through speculative means will also be excluded. Finally, the court also ruled that Reisman may not opine on issues of spoliation or destruction of documents in answer to Florez’s accusations, becuase those accuasations have already been barred. Anything that Reisman would add is therefore not needed.

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Posted in 7th Circuit, Case Summary, Expert Witness, FRE 702, Information Security, Judge Rebecca R. Pallmeyer, N.D. Ill., Spoliation | Tagged: , | 1 Comment »

Case Blurb: Herriot; Court re-crafts protocol for privileged waiver on inadvertently produced documents (7th Cir.)

Posted by rjbiii on March 30, 2009

Ordinarily, disclosure of confidential information to an unprotected third party operates as a waiver. Under FRE 502, however, disclosure of privileged information will not operate as a waiver when “(1) the disclosure is inadvertent; (2) the holder of the privilege or protection took reasonable steps to prevent disclosure; and (3) the holder promptly took reasonable steps to rectify the error, including (if applicable) following Federal Rule of Civil Procedure 26(b)(5)(B).” All three elements described in FRE 502 must be satisfied to prevent a waiver.

Plaintiffs argue that “[FRE] 502 is applicable to this case[,] and Defendants offer no reason why it would not be ‘just and practicable’ to apply [FRE] 502 to this case as in every other case.” Defendants argue that this Court should apply the three-part inquiry quoted in Judson. The Judson test requires the court to decide (1) whether the disclosed material was privileged, (2) whether the disclosure was inadvertent, and (3) whether the privilege was waived.

There is no question that FRE 502 applies to this case. The 2008 Amendment clearly stated that FRE 502 applies to matters pending on September 19, 2008, “insofar as is just and practicable.” This matter was pending on that date, and this Court finds no reason, and Defendants have pointed to none, that precludes the application of FRE 502.

[…]

To properly assess whether FRE 502(b) overrides Judson, this Court examines each step of the Judson test.

The first step of the Judson test requires the court to determine whether the documents at issue are privileged. This step must remain in place under FRE 502(b), which applies only to privileged information that was inadvertently disclosed. Prior to addressing any of the elements stated in FRE 502(b), therefore, the court must determine whether the documents are privileged. If the documents are not privileged, the inquiry ends. If the documents in question are privileged, then FRE 502(b) applies, and the court must determine whether each of FRE 502(b)’s elements was satisfied. The first element of FRE 502(b), which also is the second step of the Judson test, requires the court to assess whether the party’s disclosure was inadvertent. Therefore, this Court will assess whether a disclosure is inadvertent. FN6

FN6: Inadvertence under FRE 502(b) is not necessarily the same as, and does not necessarily mirror the case law describing, inadvertence under Judson.

Defendants also urge this Court to adopt Judson’s third step, which requires the court to determine, using a “balancing approach,” whether a waiver occurred despite the inadvertent disclosure of privileged information. The balancing approach requires the court to consider “(1) the reasonableness of the precautions taken to prevent disclosure; (2) the time taken to rectify the error; (3) the scope of the discovery; (4) the extent of the disclosure; and (5) the overriding issue of fairness.”

That tack, however, has been at least partially foreclosed by Congressional action. FRE 502 specifically states that inadvertent disclosure “does not operate as a waiver in a Federal . . . proceeding.” In other words, the second and third steps of the Judson test have been folded into the entire FRE 502(b) inquiry. FRE 502 does not, however, prohibit the use of the Judson factors. FED. R. EVID. 502(b) advisory committee’s note (noting that the non-dispositive factors a court may consider “are the reasonableness of precautions taken, the time taken to rectify the error, the scope of discovery, the extent of disclosure and the overriding issue of fairness”). Thus, while “[FRE 502(b)] is flexible enough to accommodate any of those listed factors,” it “does not explicitly codify [the Judson] test[] because [the factors it uses are] a set of non-determinative guidelines that vary from case to case.” Therefore, the court may, but need not, use some or all of the Judson factors to assess whether FRE 502(b)’s requirements have been satisfied.

This Court therefore adopts the following test. First, a court determines whether the disclosed material is privileged. If it is not, the inquiry ends. If the material is privileged, the court applies FRE 502(b). If the court concludes that disclosing party satisfied all of the elements in FRE 502(b), the privilege is not waived. If, however, the disclosing party fails to satisfy any of the FRE 502 elements, the privilege is waived. In applying FRE 502(b), the court is free to consider any or all of the five Judson factors, provided they are relevant, to evaluate whether each element of FRE 502(b) has been satisfied. FN7.

FN7: One court has applied FRE 502(b) in a rather peculiar fashion, choosing to adopt the factors articulated in the committee’s note as a wholesale test of inadvertent disclosure. Rhoads Indus., Inc. v. Bldg. Materials Corp. of Am., 254 F.R.D. 216, 218-27 (E.D. Penn. 2008). Strangely, using only the Judson factors to determine the waiver question eliminates any need to consult the elements required under FRE 502. Such an approach would ignore a Congressional mandate and substitute judicial holdings for legislation. Therefore, this Court concludes that a better approach focuses on the elements required by FRE 502 and uses the Judson factors, where appropriate, to supplement this analysis.

Heriot v. Byrne, 2009 U.S. Dist. LEXIS 22552 at *16-(N.D. Ill. Mar. 20, 2009) (internal citations removed)

Posted in 7th Circuit, Case Blurbs, FRE 502, Magistrate Judge Martin C. Ashman, N.D. Ill., Privilege, Waiver of Privilege | 1 Comment »

Case Blurb: APC Filtration; Parties held culpable for violating court order before it was ever issued

Posted by rjbiii on October 23, 2007

Becker and SourceOne failed to comply with [the court’s] order to produce documents because Becker had earlier discarded the computer. Becker and SourceOne’s own answers to APC’s interrogatories indicate that Becker communicated by email with Zehua but that “[t]he dates and times of these e-mail exchanges are unknown” because “Becker no longer is in possession of the e-mails.” (Defs.’ Answer to Pl.’s Interrog. No. 5.) Becker and SourceOne provided a similar answer with respect to Becker’s communications with AmSan. (Defs.’ Answer to Pl.’s Interrog. No. 15.) It is now clear that there must have been some communications between Becker, Zehua, and AmSan during Becker’s period of employment with APC because, as the parties agreed at oral argument, Becker and SourceOne had established contractual relationships with both of these companies prior to his termination in January 2007. Furthermore, the parties now agree that AmSan has responded to a subpoena by producing over 300 pages of e-mail correspondence, containing approximately 60 messages. Whether these represent the entirety of Becker’s communications in furtherance of his plan to compete with APC or merely the tip of the iceberg is impossible to tell, since the computer no longer exists. This is precisely the situation that the rules governing discovery are intended to prevent.

The Court specifically finds, in light of what Becker did (traveling 20 miles to dispose of the computer in a construction site Dumpster) and when he did it (within days of receiving notice of APC’s lawsuit), that Becker acted in bad faith in order to prevent APC from discovering potentially damaging evidence. See Langley, 107 F.3d at 514 (Rule 37 sanctions may only be imposed where a party displays willfulness, bad faith, or fault). Although this conduct occurred prior to the Court’s order, it is enough that Becker’s culpable conduct “eventually culminated in the violation.” Id. (quoting Marrocco v. Gen, Motors Corp., 966 F.2d 220, 224 (7th Cir. 1992)). Therefore, because Becker acted in bad faith and violated a discovery order issued by this Court, Becker and SourceOne are subject to sanctions under Rule 37(b).

(emphasis added)

APC Filtration, Inc. v. Becker, 2007 U.S. Dist. LEXIS 76221 (N.D. Ill. Oct. 12, 2007)

Posted in 7th Circuit, Case Blurbs, Duty to Preserve, FRCP 37(b), Magistrate Judge Martin C. Ashman, N.D. Ill., Sanctions | Tagged: , | Leave a Comment »

Case Blurb: APC Filtration; Court explains why disposal of a computer containing discoverable information was improper

Posted by rjbiii on October 23, 2007

In order for [the] duty [to preserve the computer] to exist, the computer and its contents must have been discoverable under Rule 26 and [possessors of the computer] Becker and SourceOne must have had reasonable notice that the computer or its contents could be the subject of future discovery requests. In this case, both conditions are met.

Under the liberal standard of discovery relevance, material is discoverable if it is admissible or “reasonably calculated to lead to admissible evidence.” Fed. R. Civ. P. 26(b)(1). In this case, the allegations that support APC’s claims center on Becker’s conduct in communicating with various suppliers and customers within the vacuum filter and bag industry as well as his alleged misappropriation of proprietary information that was stored in computerized form. Becker stated in his affidavit that he used the computer for both business and personal reasons. Given the nature of the allegations and Becker’s use of the computer for business purposes, the contents of the computer were clearly discoverable.

Furthermore, Becker and SourceOne had reasonable notice that the computer could become the subject of discovery requests at the time that Becker threw the computer away. APC’s complaint was filed on March 15, 2007, and counsel for Defendants made his initial appearance on March 19, 2007. Becker admits to throwing the computer away sometime after March 21, 2007. As discussed above, notice of a complaint can put a litigant on notice that evidence is likely to be requested, triggering the duty to preserve. Cohn, 1995 WL 519968 at *5. In this case, Becker had notice based on the nature of APC’s allegations that the computer could become part of the discovery process. Because the computer’s contents were discoverable and Becker had reasonable notice that the computer could become the subject of a discovery request, Becker had a duty to preserve the computer as evidence prior to the date on which he discarded it. Therefore, this Court may impose sanctions pursuant to its inherent power.

APC Filtration, Inc. v. Becker, 2007 U.S. Dist. LEXIS 76221 (N.D. Ill. Oct. 12, 2007)

Posted in 7th Circuit, Case Blurbs, Data Management, Document Retention, Duty to Preserve, FRCP 26(b), Magistrate Judge Martin C. Ashman, N.D. Ill. | Tagged: , | Leave a Comment »