Friday, August 9, 2013

Show Me the Metadata!

Ellis v. Toshiba America Information Systems, Inc., B220286 (D2d1, as amended, Sept. 10, 2013).
The underlying action in this case—a consumer product class action over defective Toshiba laptops—was settled in a coupon settlement that was granted final approval in May 2007. But that is not the subject of the appeal. In the ensuing six years, the defendant and one of the plaintiff lawyers engaged in a protracted battle over the attorney’s request for $24.7 million in attorneys fees. Because the attorney didn’t keep good records, disobeyed the court’s orders in the fee litigation, and falsified the record on appeal, the ultimate result was an award of appellate sanctions, the affirming of significant discovery sanctions awarded by the trial court, the limitation of the fee award to costs and fees incurred by staff, and a referral to the state bar.

Lori Sklar is a solo practitioner. She is licensed in California, but works out of her house in Minnesota. Along with a Texas firm, she represented a plaintiff class in a product defect class action over allegedly defective Toshiba laptops. The case settled in 2006, for largely non-monetary relief. The trial court gave final approval in 2007, and, in early 2008, granted the Texas firm’s fee petition, awarding them $1,050,000 for their efforts on behalf of the class. Sklar, however, who had switched sides to become an objector, filed a fee petition of her own for $24.7 million in fees, based on 25 percent of an asserted settlement value of just shy of $100 million, later revising her demand downward to just $12 million, along with $900k in costs. Toshiba, which had not objected to the award to the Texas firm, opposed Sklar’s request, and, as the court understatedly puts it “protracted litigation and many discovery disputes followed.”

When confronted with Sklar’s $24 million demand, Toshiba sought discovery. Sklar produced redacted hardcopy billing records. Toshiba, pointing out that these records appeared to show that Sklar worked up to 16.75 hours a day, seven days per week, including holidays for twenty-two months, demanded searchable ESI of Sklar’s billing records. Sklar produced redacted PDFs. Toshiba responded by requesting native format files, and the court ordered her to do so. (Sklar told the court, “I don‘t even know what native format means,” to which the court responded—sounding tellingly like a loss prevention partner―You'll have to find out. I know. Apparently [Toshiba‘s counsel] knows. You‘re going to have to get educated in the world of . . . electronic discovery. E.S.I. [electronically stored information] is here to stay, and these are terms you‘re just going to have to learn.”). In response, Sklar produced MS Word files that she created by converting them back from the PDFs. Toshiba then objected due to lack of metadata that would authenticate whether the time entries were genuine.

After Sklar was unable to produce original natives—having destroyed them—the court, recognizing that “it is extremely poor judgment to wipe and delete an original file of your Timesheets,” ordered her to cooperate with Toshiba to have her computer forensically examined to recover the deleted time files. Sklar than proceeded to take every available effort to frustrate that collection, refusing to agree to an expert or a protocol for the collection. The court specifically ordered the inspection to occur on a date certain, and when that was not complied with, ordered her to show cause. The trial court ultimately awarded Toshiba $165,000 for sanctions, specifically noting that it was not imposing sanctions for the original loss of the metadata, but instead for her failure to comply with the court’s orders regarding the inspections and to meet and confer on ESI issues.

In a subsequent deposition of Sklar, she showed up with two boxes of what were purportedly her handwritten time records. She then prevented them from being forensically examined, which led the court to order that they could not be used. Sklar also prevented the deposition of her expert on the $100 million valuation of the settlement by withdrawing his declaration, only to continue to cite the declaration throughout the litigation, and even on appeal. Later, Sklar’s experts on the reasonableness of the 25 percent benchmark, Arthur Miller (presumably this Arthur Miller, not the other one), produced more than seven thousand pages of documents at his deposition, despite the fact that they had been subpoenaed seventeen months earlier.

Sklar filed her fees motion, requesting over $12 million, based on a loadstar with a 2x multiplier for work before the settlement, and a 1.75 enhancement on fees thereafter, plus over $900,000 in expenses. Ultimately, the trial court, employing the negative inferences for providing only weaker evidence when stronger evidence was available, and for intentionally concealing evidence from CACI instructions 203 and 204, found that for the purposes of calculating a baseline loadstar, Sklar’s billing records were unusable, containing “troubling inconsistencies and omissions.” The court noted that Sklar’s records suggested that she worked eleven hours per day, every day, for five years. Without a credible basis to calculate a loadstar, the court declined to award any fees at all for Sklar’s time. The court did, however, grant Sklar an award for 1,769 hours of staff time at $100 per hour, with no multiplier. Both parties appealed.

Before it reached the merits, the court of appeal addressed a troubling issue with the appellate record. Apparently the key exhibit that consisted of Sklar and her firm’s time records, was not the same as that submitted to the trial court. It contained an additional ninety-six pages of handwritten time records, and also reorganized and de-duplicated records that were contained in the trial court filing. Toshiba moved to strike. The court granted the motion as to the ninety six pages, declined to strike the remainder because, even as modified, the exhibit was still too much of a “disorganized jumble” to substantiate a loadstar calculation and awarded Toshiba appellate sanctions to be calculated on remand.

Moving to the merits, the court held that the trial court was within its discretion to award sanctions for the non-compliance with its discovery orders. The trial court was justified in awarding sanctions, both for Sklar’s failure to permit the examination of her computer, and also for refusing to follow the court’s order to confer on a protocol under which the inspection would occur.

The court also affirmed the trial court’s denial of Sklar’s fee petition. In particular, it found that the findings that there was insufficient credible evidence to make a loadstar calculation was supported by substantial evidence, particularly in light of the court’s findings regarding Sklar’s credibility. The court also rejected a number of procedural objections, holding the trial court could permissibly rely on the adverse inferences provided by Evidence Code § 412—the statutory basis for the CACI instructions cited by the trial court—and that it did not abuse its discretion in excluding the belatedly produced handwritten billing records.

The court did, however, affirm the trial court’s award of fees for Sklar’s staff, upholding the finding that the records that formed the basis for that award were in order, although it did order a minor recalculation of those fees on remand. The court remanded for a calculation of costs—which the trial court had not ruled on—but limited the award to the $114,900 that was contained in the settlement agreement, rejecting Sklar’s demand for over $900,000. Finally, in a very understated statement given the extent of the chicanery involved, the court ordered that “the clerk of this court is directed to send a certified copy of this opinion to the State Bar.”

Affirmed, remanded for limited corrections and calculation of sanctions.

Practice Point: While the facts of the case and the extent of the misconduct are extensive (sorry for the long post) this opinion is perhaps most interesting for the issues that it did not decide—the significant ESI-related discovery issues that arose during the fees litigation.  Despite the fact that ESI has been part of the discovery toolkit for over a decade and that Code of Civil Procedure was amended to deal with ESI in 2009, many of these issues have never been addressed in a published California opinion.

It is thus significant that the court, in several footnotes, sets out several useful statements about electronic discovery that have been heretofore unaddressed in California authority. Although these statements are clear dicta, they are likely to be oft cited anyway, given the paucity of California authority on the issue, as the court itself recognizes in footnote 6: “There is little California case law regarding discovery of electronically stored information under the [Electronic Discovery] Act.”

For instance, footnote 5 contains an excellent explanation of metadata and its discoverability: 
Metadata, or data about data, is data that provides information about other data, hidden or embedded information that is stored in electronically generated materials, but which is not visible when a document or other materials are printed. In the context used in this case, metadata includes data concerning the author, date and time of creation, and the date a document was modified. System metadata is relevant if the authenticity of a document is questioned. Metadata thus is discoverable if it is relevant to the claim or defense of any party and is not privileged.
(quotations and alterations omitted).

Citing federal law, which the court recognized as persuasive, the court further notes in footnote 6 that “production of electronically stored information in PDF format may not be sufficient if the requesting party can show that the format is not reasonably usable and that the native format, with accompanying metadata, meet the criteria of reasonably usable whereas the PDF format do[es] not” (citations and quotations omitted). The opinion goes on to say that “parties are subject to a general duty to preserve such things as deleted data, backup tapes, and metadata that constitute unique, relevant evidence that might be useful to an adversary.”

And in footnote 18, it notes that “[t]he imaging of a hard drive is a first step in attempting to retrieve discoverable data that has reportedly been removed or destroyed.”

I can imagine all of these points working their way into briefs on discovery disputes in the near future.

PPS on Judicial Biography and Citation Nerd Issues: It’s fitting that this opinion was authored by Justice Jeffrey Johnson, who spent ten years on the bench as a federal magistrate judge in the Central District of California, at the forefront of e-discovery. Kudos. I sincerely hope that Justice Johnson and his colleagues will take up some discovery writ cases where the type of insight they provide in the above dicta can work its way into holdings and provide some needed clarity on ESI issues in California state courts. (Which is by no means to say that the trial judge in this case—Judge Mohr in civil complex in L.A. Superior—did not himself have a firm grasp on the ESI issues presented.) It would just be nice to have something to cite.

Also—as a practitioner who is often stuck citing federal trial court decisions on discovery issues because of the lack of citable California precedent—it seems noteworthy to me all three federal e-discovery cases that Justice Johnson cites as persuasive are magistrate judge decisions reported in the West’s Federal Rules Decisions reporter. The FRD is one of the few case reporters that maintains some degree of editorial discretion. It also occasionally publishes articles on confounding issues of procedure, which are available in Westlaw database “FRD-ART.” Although it is by now well-established that all unpublished federal cases are citable in California state court, I’ve always felt that going out of the way to find and cite cases reported in the FRD tends to signal a more studious consideration of tough procedural issues. I’m glad that Justice Johnson seems to (at least implicitly) agree. Perhaps there’s room in the market for a California Rules Decisions reporter.

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