Court Finds International Blocking Statute Irrelevant and Scanned PDF Images Not Readily Usable

AccessData Corp. v. Alste Tech. GMBH, 2010 WL 318477 (D. Utah Jan. 21, 2010). In this international breach of contract action, the plaintiff, a U.S. company, requested a reproduction of previously produced discovery in native format. The defendant, a German company, argued that compliance with the discovery requests would violate the German Data Protection Act (GDPA), subjecting the company to civil and criminal penalties under a German blocking statute. The defendant also claimed that its previous electronic production was in a “readily usable form” and reproduction would be unnecessarily burdensome. Reviewing the GDPA, the court found nothing that barred discovery of personal information provided customer consent was obtained, and even if disclosure was prohibited under the GDPA, the U.S. Supreme Court has held that blocking statutes do not deprive U.S. courts of the power to compel production from a foreign party subject to its jurisdiction. See Societe Nationale Industrielle Aerospatiale v. United States District Court, 482 U.S. 522 (1987). Addressing the production format dispute, the court determined that scanned PDF images are not readily usable as required by Fed.R.Civ.P. 26(b)(2)(E)(ii) and ordered the defendant to reproduce the requested documents in native form or in an electronically generated PDF format.

In-House Impact: In a globalized world where oceans and national boundaries no longer create barriers in communication and business, clashes between seemingly incompatible discovery and privacy laws are inevitable. In these cross-border discovery disputes, the discovery of data located outside U.S. borders is often subject to strict foreign data protection and privacy regulations. Corporations must learn to anticipate the potential conflicts of law, recognize them when they arise and choose an appropriate solution based on the facts and circumstances presented.

Court Revisits Zubulake, Determines Failure to Issue Written Litigation Hold Constitutes Gross Negligence

Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of Am. Sec., LLC, 2010 WL 184312 (S.D.N.Y. Jan. 15, 2010). In this litigation involving hedge funds, the defendants sought sanctions, alleging the plaintiffs engaged in evidence spoliation and submitted false and misleading statements in regard to document preservation efforts. Originally, the thirteen plaintiffs discussed in this case failed to issue written litigation holds when the duty to preserve arose in 2003. Seven of the plaintiffs eventually issued written holds, while six plaintiffs failed to issue a written hold at any time. After defining negligence, gross negligence and willfulness in the discovery context, the court noted that following the final Zubulake opinion in July 2004, the duty to issue written litigation holds was clear. The seven plaintiffs who eventually issued written holds were found to have acted negligently, while the six plaintiffs who failed to issue any written litigation hold were found grossly negligent and subject to a permissive adverse inference sanction. The court found all thirteen plaintiffs worthy of monetary sanctions since they “conducted discovery in an ignorant and indifferent fashion,” and awarded the defendants reasonable attorneys’ fees and costs associated with the motion. Finally, the court ordered two of the plaintiffs to search backup tapes for the relevant time period at their expense.

In-House Impact: This ruling reiterates the importance of implementing a proper preservation protocol, which includes establishing a well-documented legal hold process. Counsel has a duty to enforce and monitor legal hold compliance and should actively follow up with key players and employees who may be affected by the hold. To increase defensibility of the process, counsel should also maintain documentation of who, what, when and how legal holds were issued and acknowledged.