Lawyers In Hot Water For Not Monitoring Electronic Discovery

October 2007

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Qualcomm, Inc. v. Broadcom Corporation, No. 05-CV-1958-B(BLM), 2007 WL 2296441 (S.D. Cal. August 6, 2007) is likely to have long-lasting impact on the standards affecting legal counsel and electronic discovery.

The underlying case’s central issue is whether Qualcomm participated in development of an industry standard for which Qualcomm had patent coverage. The Court concluded that, contrary to Qualcomm protestations of innocent error, Qualcomm knowingly participated in the standards meetings and therefore could not enforce its patents against those standards.

The Court finds Electronic Discovery abuse

The case is important to the rest of us because it addresses the consequences when electronic discovery is not complete. In this case, previously undisclosed and relevant documents were identified during cross-examination on the last day of trial.

After further investigation, the Court described the additional information as follows:

“…Counsel stated that Qualcomm had discovered ‘a substantial number of electronic documents’ that ‘appear to be inconsistent with arguments we made at trial, and at the post-trial hearing, regarding Broadcom’s affirmative defense of waiver.’ Counsel then apologized to the Court ‘professionally and personally … for asserting positions that we would not have taken had we known of the existence of these documents.’ However, Counsel insisted that ‘we presented our arguments in good faith, and certainly would not have knowingly presented argument that we believed to be contrary to fact.’ That same day, the court received a separate letter of apology directly from Qualcomm’s General Counsel and Executive Vice President Louis Lupin, in which Mr. Lupin conveyed ‘[his] regret and apologies regarding the circumstances …’”

The apologies were not sufficient. The Court found that Qualcomm’s discovery responses were “calculatedly misleading and totally false.” The Court described the information revealed at trial as follows:

“…these twenty-one emails were just a hint of the over two hundred thousand pages of emails and electronic documents that were finally produced four months after trial containing direct evidence that [description of Qualcomm’s conduct relevant to issues before the Court]… However, before this production occurred and even after the discovery of the twenty-one emails in Ms. Raveendran’s email archive, Qualcomm counsel continued to insist that they had conducted a reasonable search for responsive documents during discovery and that the twenty-one emails were not responsive because they were irrelevant.”

“… Qualcomm counsel’s discovery responses demonstrate that they were able to locate with alacrity company records from December 2003 forward and find four or more Qualcomm employees participating in proceedings of the JVT. Yet inexplicably, they were unable to find over 200,000 pages of relevant emails, memoranda, and other company documents, hundreds of pages of which explicitly document massive participation in JVT proceedings since at least January 2002. These examples of Qualcomm counsel’s indefensible discovery conduct belie counsel’s later implied protestation of having been “kept in the dark” by their client.”

…“The Court finds it incredible that Qualcomm never conducted such an obvious search for these key terms in the email archives of these key Qualcomm witnesses during the many months of discovery that occurred before trial, since Broadcom clearly had requested all of it and more.”

In addition to losing the patent litigation on the merits, Qualcomm will suffer other consequences because of what the Court described as “gross litigation misconduct”. The Court granted Broadcom’s Motion for Exceptional Case Finding and for an award of Broadcom’s attorneys’ fees and costs. The related magistrate court indicated in a separate Order to Show Cause that she is inclined to impose a variety of sanctions on Qualcomm’s lawyers, including but not limited to:

1. Monetary sanctions,
2. Continuing legal education,
3. Referral to the California State Bar for appropriate investigation and possible sanctions, and
4. Counsel’s formal disclosure of this Court’s findings to all current clients and any courts in which counsel is admitted or has litigation currently pending.

The hearing on these sanctions is currently scheduled for October 12, 2007. Because of the threat for these personal sanctions and findings of professional misconduct, Qualcomm’s former attorneys are asking the Court to pierce their client's privileged communications based on a self-defense exception. One of the two law firms claims to have “very compelling exonerating evidence”. Qualcomm is not opposed to the Court having such information under seal, but is refusing to waive such privileges because of concern that such waiver would have on other matters. In a September 28 hearing, the Court refused to the order that privilege be waived based on self defense, but stated that the former Qualcomm lawyers could submit declarations that describe how their various duties were allocated.

What is the standard of care for legal counsel?

Regardless of the standard of care, legal counsel (both in-house and outside) must pay additional attention to electronic information, since the alternative is to claim reliance on their client in the blame game that follows. In this finger-pointing environment, no one can win. Even if the Qualcomm lawyers are found to have done nothing wrong, certainly they are not happy having to defend themselves in this fashion.

Companies should have an executive with sufficient experience and education to monitor compliance with litigation holds and actual discovery requests. Although primarily a data processing position, this person should report to the general counsel for this purpose, and should work directly with outside counsel in responding to discovery requests. Since most companies (including many major firms) do not have such a person, what is legal counsel required to do?

No doubt, the privileged records would (or will) show that Qualcomm’s lawyers told their client to turn over all relevant documents. But, is simply telling a client to do this adequate? What level of diligence should the attorney exercise in questioning whether what his client tells him is sensible? Does the lawyer need to have qualified personnel independently review electronic files to ensure that client representations are reasonable?

Before one states that industry accepted practice requires no such additional efforts by outside counsel, consider the following:

1. In the context of an internal investigation, no competent lawyer would simply ask the targeted employees to self-review their records and turn over whatever was relevant. When performing internal investigations, it is quite common for employers to employ technical experts to assess the location of relevant evidence, to gather such evidence, and then perform a centralized review of potentially-important electronic information.

2. An increasing number of cases have found sanctions for misconduct in the electronic discovery area. We provide details of one case below.

Advice for legal counsel

Legal counsel is increasingly held responsible for checking their clients’ electronic discovery representations. For example, in a mid-2004 article entitled “E-mail Electronic Discovery Sanctions Continue, with new Lawyer Standards Possibly Created”, we summarized the fifth decision in Zubulake vs. UBS Warburg (SD NY: July 20, 2004). This particular decision included specific advice for lawyers to avoid exactly the sort of thing that is now at play in the Broadcom case. The Zubulake Court specified the following "reasonable steps" required by legal counsel:

1. "Becoming fully familiar with her client's document retention practices, as well as the client's data retention architecture"

2. Identifying "key players" and "sources of discoverable information"

3. Putting "in place a litigation hold and making that known to all relevant employees by communicating with them directly"

4. Repeating the litigation hold instructions "regularly"

5. "Monitoring the compliance so that all sources of discoverable information are identified and retained on a continuing basis"

6. "Calling for employees to produce copies of relevant electronic evidence"

7. "Arranging for the segregation and safeguarding of any archival media (e.g., back-up tapes) that [the client] has a duty to preserve"

Some lawyers are already involved with some of these areas. However, few lawyers are as involved in their client's electronic discovery implementation as the Zubulake Court specified.

Because of the increasing standards for electronic discovery and the enormous consequences when cases like Broadcom erupt, our firm has increasingly been asked to assist and “audit” compliance with electronic discovery obligations. This business should continue to be brisk.