January 08, 2008
Qualcomm Sanctions Handed Down, Lessons Learned
Yesterday, the U.S District Court for the Southern District of California handed down the sanctions in the high-profile Qualcomm Incorporated vs. Broadcom Corporation case. In some aspects, this case is similar to the earlier Rambus memory case -- where one high-tech company participated in a standards-setting committee to gain an inappropriate business advantage over their competitors. In the Qualcomm case, Qualcomm could not win their patent infringement case against Broadcom if it was found that it had previously participated in the standards-setting body. Thus thousands of requested e-mails were not produced during discovery, and their existence was denied.
The 42-page order describes the circumstances and the court's reasoning. Both Qualcomm and its outside attorneys were sanctioned for what it called a "monumental discovery violation." Qualcomm either hid the existence of extremely damaging e-mails throughout, or at the very least stuck their heads in the sand by not searching key custodians' data. Either way, it's clear Qualcomm committed severe discovery violations. The court's problem was in determining the role played by their outside counsel, particularly as Qualcomm preserved its attorney-client privilege, which prevented outside counsel from fully defending their actions. Thus the court reasonably described four alternate scenarios regarding Qualcomm's outside counsel's knowledge and actions relative to the undisclosed e-mails that were substantially adverse to Qualcomm's case:
"The next question is what, if any, role did Qualcomm's retained lawyers play in withholding the documents? The Court envisions four scenarios. First, Qualcomm intentionally hid the documents from its retained lawyers and did so so effectively that the lawyers did not know or suspect that the suppressed documents existed. Second, the retained lawyers failed to discover the intentionally hidden documents or suspect their existence due to their complete ineptitude and disorganization. Third, Qualcomm shared the damaging documents with its retained lawyers (or at least some of them) and the knowledgeable lawyers worked with Qualcomm to hide the documents and all evidence of Qualcomm's early involvement in the JVT. Or, fourth, while Qualcomm did not tell the retained lawyers about the damaging documents and evidence, the lawyers suspected there was additional evidence or information but chose to ignore the evidence and warning signs and accept Qualcomm's incredible assertions regarding the adequacy of the document search and witness investigation."The court rejected the first three (partially due to Qualcomm preserving its attorney-client privilege and lack of direct evidence on the third), and found the fourth option to be most likely given these constraints:
"Thus, the Court finds it likely that some variation of option four occurred; that is, one or more of the retained lawyers chose not to look in the correct locations for the correct documents, to accept the unsubstantiated assurances of an important client that its search was sufficient, to ignore the warning signs that the document search and production were inadequate, not to press Qualcomm employees for the truth, and/or to encourage employees to provide the information (or lack of information) that Qualcomm needed to assert its non-participation argument and to succeed in this lawsuit. These choices enabled Qualcomm to withhold hundreds of thousands of pages of relevant discovery and to assert numerous false and misleading arguments to the court and jury. This conduct warrants the imposition of sanctions."In all the lengthy discussion, however, here's the money quote for those engaged in electronic discovery efforts:
"This dilemma highlights another problem with Qualcomm's conduct in this case. The Federal Rules of Civil Procedure require parties to respond to discovery in good faith; the rules do not require or anticipate judicial involvement unless or until an actual dispute is discovered. As the Advisory Committee explained, "[i]f primary responsibility for conducting discovery is to continue to rest with the litigants, they must be obliged to act responsibly and avoid abuse." Fed. R. Civ. P. 26(g) Advisory Committee Notes (1983 Amendment). The Committee's concerns are heightened in this age of electronic discovery when attorneys may not physically touch and read every document within the client's custody and control. For the current "good faith" discovery system to function in the electronic age, attorneys and clients must work together to ensure that both understand how and where electronic documents, records and emails are maintained and to determine how best to locate, review, and produce responsive documents. Attorneys must take responsibility for ensuring that their clients conduct a comprehensive and appropriate document search. Producing 1.2 million pages of marginally relevant documents while hiding 46,000 critically important ones does not constitute good faith and does not satisfy either the client's or attorney's discovery obligations. Similarly, agreeing to produce certain categories of documents and then not producing all of the documents that fit within such a category is unacceptable. Qualcomm's conduct warrants sanctions." (emphasis added)Thus legal professionals are again cautioned that it is not sufficient to blindly rely upon a client's collection and production, whether it be paper or electronic. I came across this issue a number of times when involved in business litigation. Due to the huge volume of electronic data, it's tempting for a number of reasons to rely upon the data set produced to the law firm. However, as the court correctly held, that's not sufficient in of itself, especially when surrounding circumstances give rise to these concerns. From reading the ruling and earlier reports, I think it's fair to say that both Qualcomm and its outside counsel engaged in excessive gamesmanship, gambled, and lost big time.
Thus it's important for outside counsel to have access to a client's ESI, to direct their efforts, and to even withdraw if the client refuses. That's easier said than done, especially when an important big client flexes its muscles. However, it's still very important to prevent your firm from knowingly or unknowingly being made part of a fraud upon the court. It's also incumbent on outside counsel to conduct reasonable searches of the information themselves. While this is often delegated to more junior staff, senior attorneys are still responsible to ensure it has occurred. While some senior attorneys may not be particularly tech-savvy, they understand the importance of identifying and producing relevant and responsive documents, they understand the role that e-mail plays in modern litigation as a form of correspondence, and should know that sooner or later, it's going to bite them and their client if not appropriately addressed early on. Besides, most litigators know that it's usually better to disclose bad news yourself than have it come from the other side.
What's so surprising in this case is that Qualcomm was in possession of those e-mails before it filed suit against Broadcom, and therefore should have known it had critical weaknesses in its case. While unfortunate for all involved, at least it serves as yet another example of what not to do in handling problem items in electronic discovery.
More coverage of the ruling is found on Law.com.
Topic(s): Electronic Discovery
Posted by Jeff Beard