United States v. Scholle & the Introduction of Computer Evidence

If your firm is introducing computer evidence in court, be aware that a stronger foundation may be required for computer evidence than regular business records. Part of the basis for this is a decision by the 8th Circuit, United States v. Scholle, 553 F.2d 1109 (8th Cir. 1977). In this admittedly ancient decision (in terms of digital technology) the court found that a party presenting computer evidence has to show evidence of how data for its system was collected, how the data is maintained in the system, and how the extracted data to be presented was retrieved. The Scholle standard calls for a "more comprehensive foundation".

Scholle concerned "novel evidence of a computer printout representing a compilation of information concerning cocaine exhibits" from the DEA that was presented in a case brought against defendants charged with importing and distributing cocaine. The computer records showed that there was an unusual chemical in the cocaine. They came from the System to Retrieve Information from Drug Evidence (STRIDE) which held data on drug samples analyzed by several DEA labs in the United States. Evidence of benzocaine in both cocaine seized by one party importing it, and another party distributing it, was presented to show a chain of conspiracy.

The court acknowledged that a judge has broad discretion to determine the relevancy of computer evidence and noted that FRE 803(6) specifically included "data compilations" in the category of records which can be admitted without the testimony of the person who prepared them when they are made in contemporaneously in the regular course of business. The court held that:

"Even where the procedure and motive for keeping business records provide a check on their trustworthiness (United States v. Fendley, supra), the complex nature of computer storage calls for a more comprehensive foundation. Assuming properly functioning equipment is used, there must be not only a showing that the requirements of the Business Records Act have been satisfied, but in addition the original source of the computer program must be delineated, and the procedures for input control including tests used to assure accuracy and reliability must be presented. "

While the Court of Appeals held that the District Court did not err in admitting the evidence from the STRIDE system, it criticized the weak foundation for the evidence. While the originator of the system testified adequately about the source of the data in the system, no evidence was shown about the procedure for confirming the reliability of its input into the system.

"In evaluating the admission of the disputed printout, we must consider the reliability of what goes into the computer as well as the reliability of what comes out."

While there have been later Court of Appeals decisions holding that computer records should be treated like any other evidence, it remains advisable to follow the Scholle standard. See the Wikipedia article on Digital Evidence.

Judges' Panel UF Law EDRM eDiscovery Conference

On March 30, 2016 I participated, via an online livestream connection, in the 4th Annual University of Florida Law EDRM eDiscovery Conference. The Conference was hosted by William Hamilton, the Executive Director of the University of Florida’s eDiscovery Project, and George Socha, one of the founders of the EDRM.

The final panel of the conference was a discussion between five Florida state and federal court judges on eDiscovery competence; the new amendments to the FRCP; and eDiscovery hearings and motion practice.

The moderator, Judge Ralph Artigliere is a retired Florida State Circuit Judge. Judge Artigliere is the co-author with William Hamilton of the LexisNexis Practice Guide to Florida E-Discovery and Evidence.

Judge Gill Freeman is a Florida Circuit Court Judge in the 11th Judicial Circuit.

Judge Gary Jones serves as a United States Magistrate Judge for the U.S. District Court for the Northern District of Florida.

The Hon. William Matthewman is a judge with the United States District Court for the Southern District of Florida.

Judge Anthony Porcelli is a magistrate judge for the Middle District of Florida.

Judge Artigliere started the discussion off with remarks about Federal Rule of Civil Procedure 26(g) which requires an attorney to certify that their discovery submissions are complete and accurate. He asked the panel about how often they saw this Rule violated.

Judge Porcelli noted that the committee notes indicate that the courts should be aggressive in implementing 26(g). He could not recall one case before him the 7 years prior to the December 2015 amendments where Rule 26(g) was invoked for the imposition of sanction. Instead sanctions have been requested by under Rule 37, but he expects Rule 26(g) to be the focus now. There has to be a good faith basis for objections. He has still has not seen anyone invoke 26(g) in the four months since the amendments were implemented.

Judge Jones in 16 years on the bench has never had anyone file for sanctions under 26(g). Has sua sponte brought up 26(g) many times however. He described it as an overlooked part of the FRCP. Many lawyers don’t understand when they sign a discovery response that they are representing that they made a reasonable inquiry that the production is accurate to the best of their knowledge and a reasonable investigation has been conducted. Proportionality is now a hallmark issue since the December 2015 changes, and is no longer just a boilerplate objection.

Judge Matthewman has not seen a 26(g) motion, but has seen sanctions motions under 37. He hopes to see more cooperation amongst counsel rather than motions for sanctions. Discovery should ideally become more fluid and rapid, but doesn’t actually expect this to happen anytime soon.

Judge Artigliere noted that as amended on December 1, 2015, a comment to Rule 1 requires cooperation between the parties, but this is not stated in the rule itself.

Judge Porcelli said that the duty to cooperate is not imposed as an explicit rule, but the changes have come close to making it such. He would suggest to parties that they have an obligation to cooperate to facilitate the discovery process since that this the spirit of the rule.

Judge Artigliere observed that that idea is to see the process work the way it should, and simply prevent parties from obstructing it.

Judge Jones noted that while a party that is the custodian of documents is usually the most knowledgeable about what search terms should be used to find relevant material in them, cooperating on these terms is not the same thing as capitulation. It is sharing information and engaging in debate, rather than necessarily a conflict between opposing sides.

Judge Porcelli stated that there doesn’t have to be an agreement on terms, as a producing party must simply produce relevant documents and withhold privileged material. He said it makes no sense to come to the judge to decide upon search terms, and views judges making these decisions as completely inappropriate.

Judge Jones noted that Judge Francis (she apparently meant Magistrate Judge James C. Francis IV of the S.D.N.Y. see the 2/3/2016 Tip of the Night), takes the view that it is not the proper role of the judge to decide what are or are not appropriate search terms. Lawyers and parties know better. The role of the judge is to resolve disputes, not be a third wheel.

Judge Freeman said that in state court the judges don’t have an equivalent of 26(g) but use Pretrial Orders that require that the parties get together early on and submit an outline for discovery to the court. Her experience as judge and lawyer is that if the bar is small there is greater cooperation because attorneys know they will see each other again. When lawyers have never litigated against each other, they are less likely to cooperate. Judge Freeman finds that the attorneys have usually not talked to each other about discovery issues and she forces them to do so before letting them proceed.

Judge Artigliere was not happy when the parties resolved discovery disputes in the courtroom, and thought they should do so beforehand and not waste court’s time.

Judge Freeman said parties should ask for case management orders and a conference from the beginning, and come in with an outline and timelines for discovery and proposals for ediscovery.

Judge Jones noted a difference between districts. Rule 16 encourages judges to be involved early in active case management. Under Rule 16(b) telephone or in person conference are often limited to complex litigation. In his district, Judge Jones requires a Rule 26 report, then has a 16(b) conference or issues scheduling order. In 98 per cent of cases parties don’t ask for a case management conference and then the court issues case management and scheduling orders along standard lines. If lawyer wants to discuss ediscovery issues with the court, it must schedule a 16(b) conference.

Judge Porcelli said that in the Middle District, in the Tampa Division, magistrate judges automatically deal with ediscovery dipsutes, but district court judges will set the schedule for the case or issue the CMO. As part of the CMO the parties could seek a conference with the judge first before filing discovery motions. A number of judges in Southern District do this, but it is a foreign practice in the Middle District.

Judge Matthewman believes that attorneys should always confer first about discovery disputes. He recommends that all attorneys that practice in this area, read the 2015 Year End Report on the Federal Judiciary by Chief Justice Roberts. (See the Tip of the Night for January 11, 2016). He quoted the Chief Justice statement that, “I cannot believe that many members of the bar went to law school because of a burning desire to spend their professional life wearing down opponents with creatively burdensome discovery requests or evading legitimate requests through dilatory tactics. The test for plaintiffs’ and defendants’ counsel alike is whether they will affirmatively search out

cooperative solutions, chart a cost-effective course of litigation, and assume

shared responsibility with opposing counsel to achieve just results.” Judge Matthewman takes this advice to heart. Cooperation is really important, and the lack of it has led to the expense of discovery getting out of hand.

Judge Artigliere recommended that attorneys evaluate the temperament of a judge by seeing who has signed on to the Sedona Cooperation Proclamation. He then raised the topic for the panel of triggers for the duty to preserve ESI, and mentioned that in Florida the situation was muddled until recently.

Judge Freeman took up this point and discussed how recent litigation with respect to voting districts has had an impact. A decision by the Supreme Court of Florida in League of Women Voters of Florida v. Detzner, concerned a matter in which relevant emails belonging to legislators went missing. If a party knows it should preserve data connected to issues it is likely to litigate, and fails to do so, courts can structure appropriate remedies, such as presuming that something in missing emails would be damaging. Judge Freeman used this remedy in a recent case where the plaintiff had no emails because they went out of business.

Judge Porcelli doesn’t see many trigger issues in cases before his court. Only one Rule 37 spoliation motion has come up and that happened to be related to a trigger. Reasonable anticipation of litigation doesn’t mean that a suit has been filed and it is difficult to advise a client correctly. In the last year, twice litigators have been proactive and asked the Judge to review their preservation efforts. Judge Porcelli denied the requests without prejudice. He couldn’t make a determination without the presence of both parties.

He sees a relationship between bad information management policies and ediscovery failures. The preamble to Rule 37(e) considers both the trigger to preserve and the reasonableness of efforts to preserve. It is not an excuse to say that you don’t have the means to preserve. If good faith and reasonable efforts are made and is ESI is nonetheless lost, you don’t commit sanctionable conduct under 37e1 and 37e2.

Judge Matthewman observed that alleged spoliation by a big corporation ought to be treated very differently than the actions of an individual who has been sued and lost emails through negligence.

He also noted that there can potentially be two standards for spoliation. The new version of Rule 37(e) is very specific when parties are dealing with ESI but doesn’t mention other more tangible types of discovery. As a consequence some courts may apply different standards for the destruction of an electronic version of an email and for a hard copy of the same email. The hard copy’s destruction would be reviewed under common law. Rule 37(e) says it doesn’t change anything under common law or alter the inherent authority of judges. Matthewman noted that Judge Grimm said the Rules Committee discussed this issue and they decided not to include hard copies under Rule 37.

Judge Artigliere noted that in Florida state courts were more likely to sanction the attorney than the client for lack of technical knowledge on ediscovery issues.

Judge Freeman noted that under Florida Statute 57.105 she was required to have an evidentiary hearing to determine whether it was the attorney or the client who was at fault.

Judge Jones has issued monetary sanctions recently in a case after there was an utter failure to produce relevant discovery involving about both ESI and hard copies. His sanctions order doesn’t specify who would pay. He has never issued a sanction order stating that the lawyer and not the client would pay.

The panel then addressed the question of how to determine if an attorney was technically competent. Judge Matthewman noted that the ‘Rambo’ discovery process where one side would ask for everything, and then the other side raises every possible objection was an old school way of doing things and going by the wayside because it was not cost effective. He suggested that clients ask if an attorney was up-to-date on ediscovery rules and if she or he cooperated with the other side. Thorny privilege issues can’t be resolved but 90 per cent of issues can be resolved during personal discussions. Clients should always ask prospective lawyers about how expensive the discovery process will be.

Judge Artigliere noted that attorneys should warn aggressive clients that filing every possible motion will only alienate judges.

The group considered Judge Scheindlin’s opposition to the new rules and the theory that just because a party was merely negligent doesn’t mean that it hasn’t caused harm. The comments to Rule 37 show that the new standard supplants the common law for spoliation sanctions in the area of ESI.

Judge Porcelli said that the gross negligence standard comes from the need to balance a level of culpability across a level of prejudice. In discussing the new Rule 37(e)(1) , the Judge brought up a 42 U.S.C 1983 civil rights case where an inmate alleged an assault by a guard and video of the incident was lost but not with the intent to deprive the opposing party of the evidence. The Rule doesn’t provide a basis on which to impose sanctions, even though the level of prejudice caused by the lost evidence is extreme Conversely under Rule 37(e)(2) which doesn’t require prejudice, the deliberate destruction of a laptop containing no relevant data, the court the court would be empowered to sanction the offending party, because there was an intent to cause an affront on the justice system.

Judge Jones said the proportionality factor is a sign of a real sea change in the rules. In last 3 or 4 months she sees the issue coming up in discovery disputes. Lawyers raise proportionality issues. Courts issue decisions on discovery motions with an eye towards proportionality.

Judge Matthewman recommends that practicing attorneys do not rely on old discovery motions that don’t include proportionality as a factor, a mistake he sees many committing.

Judge Porcelli notices the use of proportionality as a catchphrase by attorneys even though it may have no bearing on the matter at hand. The need for proportionality may influence judges to suggest phased discovery. Judge Porcelli is not thrilled about having to call proportionality shots. In part this is because when he asks parties about the value of a case, the parties are usually far apart.

See also this previous discussion by some of the same participants on the changes to the FRCP.

http://www.litigationsupporttipofthenight.com/#!The-University-of-Floridas-Breakdown-of-the-Coming-FRCP-Amendments/c193z/56077c7c0cf25fa7fe18f7b4

Storage Media for SEC Rule 17a-4

SEC Rule 17a-4 requires certain business documents to be retained for period of 3 to 6 years, and in the first two years in an easily accessible place. These include communications by broker and dealers, checks, bank statements, net capital and debt calculations, and many records made pursuant to SEC regulations.

SEC Rule 17a-4(f)(2)(ii) states that:

(A) Preserve the records exclusively in a non-rewriteable, non-erasable format;

(B) Verify automatically the quality and accuracy of the storage media recording process;

(C) Serialize the original and, if applicable, duplicate units of storage media, and time-date for the required period of retention the information placed on such electronic storage media; and

(D) Have the capacity to readily download indexes and records preserved on the electronic storage media to any medium acceptable under this paragraph (f) as required by the Commission or the self-regulatory organizations of which the member, broker, or dealer is a member.

So reading this you would apparently need to burn your financial records to a disc, use a checksum command to confirm the data copied correctly, put a data on the disc labeled with a date indicating when it must be retained until and be capable of sending the records to the SEC if they request it.

SEC has provided an interpretation of this specific provision that explains how the ESI should be stored. It states that, "the rule, by its terms, does not limit broker-dealers to using a particular type of technology such as optical disk." The SEC approves the use of other electronic storage devices that prevent the overwriting, deletion or alteration for a specified period "through the use of integrated hardware and software control codes." The SEC states that software that protects data with authentication policies or password protection does not qualify.