January's Notable Cases and Events in E-Discovery

1. In United States v. Gatto, 2019 WL 4194569 (S.D.N.Y. Sept. 3, 2019), Judge Lewis A. Kaplan denied motions to intervene for the purpose of seeking records related to the wire fraud criminal case involving NCAA Division I basketball programs that would provide information about potential NCAA infractions committed by third parties.

In October 2018, a jury convicted the defendants of conspiracy to commit, and the commission of, wire fraud related to a corruption scheme involving NCAA Division I basketball. Shortly before the defendants were sentenced, the NCAA filed a motion to intervene, seeking to obtain access to exhibits marked for potential introduction at trial and the unredacted sentencing memorandum of defendant James Gatto. Oath, Inc. (a company that operates a number of online properties including Yahoo Sports), later filed a similar motion.

The court first analyzed whether the records should be disclosed under the common law right of access. While this right of access is firmly rooted in the nation’s history and has been recognized by the Supreme Court, the court stated that the right is a discretionary matter to be determined by the trial court. To make such a determination, the court must first decide whether the documents at issue are “judicial documents.” If they are, the common law presumption of access attaches, and the court must determine the weight of that presumption. Finally, “the court must ‘balance competing considerations against it.’” Id. at *2 (citation omitted).

To determine whether the requested materials constituted “judicial documents,” the court viewed them as falling into three categories: (1) those offered into evidence but ultimately excluded by the court at trial, (2) those used to refresh a witness’s recollection during trial and (3) those discussed on the record but never moved into evidence.

Second Circuit precedent states that “judicial documents” include those presented in a public session of court that are “relevant to the performance of the judicial function and useful in the judicial process” whether or not formally admitted, although filing alone does not make materials judicial documents. Id. (quoting United States v. Graham, 257 F.3d 143, 153 (2d Cir. 2001)). Decisions involving the “court’s authority to oversee discovery and control the evidence introduced at trial” constitutes an exercise of judicial power. Id. at *3 (quoting Brown v. Maxwell, 929 F.3d 41, 50 (2d Cir. 2019)). Ultimately, without reaching a decision on the matter, the court assumed for purposes of the motions that the first category of documents — exhibits that were offered into evidence and for which the court made a substantive determination regarding admissibility — were judicial documents. Id. at *4. The court did not afford the same assumption to the second two categories of documents, which were “neither relevant to the performance of the judicial function nor useful in the judicial process.” Id. (citation omitted). The court had never been asked to take action with respect to these documents and had not relied on them in performing its duties or exercising its supervisory powers.

Proceeding with the assumption that the exhibits offered into evidence at trial were entitled to the presumptive right of access, the court then analyzed the weight to be accorded this presumption. This weight must be based on “the role of the material at issue in the exercise of Article III judicial power and the resultant value of such information to those monitoring the federal courts.” Id. (citation omitted). The presumption is stronger where the documents are used in determining a litigant’s substantive rights. And “[a]lthough a court’s authority to oversee discovery and control the evidence introduced at trial surely constitutes an exercise of judicial power ... this authority is ancillary to the court’s core role in adjudicating a case.” Id. at *6 (quoting Brown, 929 F.3d at 50). Therefore, the presumption of public access related to materials submitted in connection with motions in limine or discovery disputes is lower than that of materials introduced at trial or used in dispositive motions.

The court determined that as judicial documents, the materials sought were entitled to some presumption of public access. This presumption, however, was diminished as the exercise of authority associated with the documents — ruling on admissibility at trial — was “ancillary to the court’s role in adjudicating [the] case.”

Once the weight of the presumption had been determined, courts had to assess any countervailing factors against it. To do so, the court looked to the subject matter of the documents, namely whether it is “traditionally considered private rather than public.” Id. at *7 (citation omitted). Courts must also evaluate “the nature and degree of the injury,” which requires consideration of the sensitivity of the information and how the person seeking access intended to use it. Id. (citation omitted). Finally, courts should consider “the reliability of the information.” Id. (citation omitted).

The materials sought by the NCAA and Oath “all share the common feature of implicating individuals other than the defendants in potential NCAA rule violations.” Many of the implicated individuals were not involved in the documented conversations. The requested documents involved a range of communications varying in privacy, from wiretapped phone calls to letters sent to multiple individuals on university letterhead. Nonetheless, all of the third parties referenced in the communications could be harmed, in reputation and in a professional capacity, by disclosure of the documents. Therefore, the court found that the documents were of a sensitive nature with a high degree of potential injury. Furthermore, much of the communications consisted of hearsay, speculation and rumors. The involved individuals would not have an opportunity to explain or contest the information contained in the communications. The same was true for the redacted portions of the sentencing memorandum, which dealt only with rule violations committed by uninvolved third parties. Id. at *8.

Furthermore, the information in these documents was irrelevant at trial and immaterial in sentencing. It “played a negligible if any role in the exercise of Article III judicial power[,] and the resultant value of such information to those monitoring the federal courts is minimal.” Id. at *8. Therefore, the privacy interests outweighed the public’s right of access, and disclosure was not warranted. Id. at *9.

The court then analyzed whether the well-established qualified First Amendment right of access applied in this case. The Second Circuit has articulated two approaches in making such a determination. The first, known as the “experience-and-logic” approach, applies to judicial proceedings and documents and asks “both whether the documents have historically been open to the press and general public and whether public access plays a significant positive role in the functioning of the particular process in question.” Id. (citation omitted). The second approach, which applies to judicial documents related to judicial proceedings covered by the First Amendment right, asks whether the documents “are derived from or are a necessary corollary of the capacity to attend the relevant proceedings.” Id. (citation omitted). If, under either approach, the court determines that the qualified First Amendment right exists, it must then determine whether “on the record findings are made demonstrating that closure is essential to preserve higher values and is narrowly tailored to serve that interest.” Id. (citation omitted). Only then can documents be sealed.

In this case, the court determined that access to these documents did not derive from, nor were they a necessary corollary of, the capacity to attend the trial. The documents were not even shown to those who did attend the proceeding. Furthermore, the proposed intervenors had not provided any authority for the proposition that the documents sought were of the type historically provided to the public, and public access to documents found inadmissible did not “play a positive role in the functioning of the criminal trial.” The court therefore determined that the qualified First Amendment right did not apply, and the motions of the NCAA and Oath to intervene were denied. Id. at *10.

2. In Wilmoth v. Murphy, 2019 WL 3728280 (W.D. Ark. Aug. 7, 2019), Judge Timothy L. Brooks barred the testimony of two defense witnesses and granted an adverse inference instruction as a sanction for the repeated failures of defendant and the defense witnesses to preserve photographs that plaintiff requested from the outset of the litigation.

In this civil rights litigation, plaintiff claimed that defendant, a correctional officer, used excessive force during an incident in plaintiff’s cell. Id. at *1. Plaintiff sustained injuries during the incident and, pursuant to standard operating procedures, another correctional officer took photographs of the injuries using his personal cell phone.

From the beginning of the litigation, plaintiff requested that defendant produce the photographs of his injury. Id. at *3. He served several requests for production related to the photographs, to which defendant responded that “no photos have been located.” Plaintiff referenced the photographs numerous times during his deposition. Id. at *4. Following the deposition, defendant reported as part of a notice of disclosures that he would attempt to locate the photographs upon plaintiff’s request. Id. at *3. Thereafter, plaintiff filed four separate motions to compel related to the photographs.

Plaintiff moved for sanctions under Fed. R. Civ. P. 37(e) on the basis of defendant’s failure to produce the photographs. Judge Brooks first found “abundant” proof that defendant had a duty to preserve the photographs because defense counsel issued a litigation hold, and the court had issued an order directing defendant to provide any reports and photographs related to the incident in plaintiff’s cell. Id. at *2.

Judge Brooks next concluded that defendant failed to exercise reasonable diligence to preserve the photographs. Defendant and the other correctional officers involved admitted that the photographs existed but provided conflicting testimony about how the photographs were handled. Judge Brooks found that the photographs were either not uploaded to the jail’s internal incident reporting system in a departure from usual practice or were uploaded and subsequently misplaced or deleted, suggesting that the witnesses did not take their obligation to preserve relevant evidence seriously. Id. at *1-*2. Likewise, defense counsel “buried her head in the sand” and “never fully committed to producing” the relevant evidence. Id. at *3. Notably, defense counsel stated at a hearing that took place over a year and a half after plaintiff began moving to compel that she first became aware of the issue that very day. Judge Brooks thus concluded that defense counsel had not conducted any sort of investigation after plaintiff began raising the issue of the photographs.

Moreover, there was evidence that but for defendant and defense counsel’s failure, the photographs would have been produced. Id. at *4. Specifically, the cell phone that took the photographs became inoperable during the litigation, meaning it was likely the photographs could have been collected if defendant had promptly acted on the basis of plaintiff’s numerous requests. Judge Brooks concluded that this was more than sufficient evidence of prejudice to plaintiff.

In terms of an appropriate remedy, Judge Brooks barred the testimony of the correctional officers who failed to preserve the photographs because the actions of the officers undermined their credibility and demonstrated bad faith. Id. at *4-*5. Plaintiff could call the officers as witnesses, but they would be generally barred from testifying on cross-examination about their recollection of plaintiff’s injuries. Judge Brooks also granted an adverse inference instruction because defendant acted willfully to prevent plaintiff from accessing evidence that, in plaintiff’s view, would have supported his excessive force claim. Id. at *5.

3. In In re Petrobras Sec. Litig., 2019 WL 3403281 (S.D.N.Y. July 29, 2019), Judge Jed S. Rakoff denied a Section 1782 request for discovery in a foreign proceeding in part because a private Brazilian arbitration was not a “foreign or international tribunal” for purposes of Section 1782 but ordered the unsealing of various documents attached to the parties’ summary judgment papers in a settled class action based on the presumption of public access to judicial documents.

Cornell University was a member of a class of plaintiffs that sued Petrobras in the Southern District of New York, alleging that Petrobras violated securities laws by making materially misleading statements in connection with sales made on the New York Stock Exchange. The Southern District of New York entered a final judgment approving a settlement in the class action on July 2, 2018. Id. at *1.

Cornell University had also purchased Petrobras securities on a Sao Paolo stock exchange called the Bovespa and was involved in an ongoing arbitration before the Bovespa Market Arbitration Chamber (the CAM). The issues in the arbitration concerned the same fraudulent misstatements underlying the U.S. class action. Cornell had originally brought these claims in the New York class action, but the court dismissed them in 2015 based on a clause in Petrobras’ bylaws mandating that the specific claims be arbitrated in Brazil.

Believing that certain documents produced under seal by Petrobras in the New York class action’s discovery phase would strengthen its case before the CAM, Cornell moved the court to grant it access to these documents for use in the CAM proceeding by entering an order compelling discovery for use in a foreign proceeding under 28 U.S.C. § 1782 or, in the alternative, entering an order unsealing the documents.

Under 28 U.S.C. § 1782, a court has discretion to authorize discovery for use in a foreign proceeding if the following requirements are met: (1) the person or entity from whom the moving party seeks to compel discovery resides or is found in the district in which the court sits, (2) the discovery is “for use in a foreign proceeding before a foreign or international tribunal” and (3) the moving party is the foreign or international tribunal, itself, or “any interested person.” The court determined that Cornell failed to satisfy the first and second requirements. Id. at *2.

As to the first requirement, the court’s threshold question was whether the “resides or is found” language required the court to have personal jurisdiction over the party. Despite no binding precedent on the issue, the court concluded that based on “the great weight of authority” and instructive Second Circuit case law, it should apply a personal jurisdiction analysis to determine whether Petrobras was “found” in the district for purposes of § 1782. Id. at *3-*4. The court determined that the only ties Petrobras had to New York were far from sufficient to subject Petrobras to the court’s general jurisdiction. The court also found that Petrobras had not purposefully directed its activities relevant to the CAM arbitration in the forum, and therefore the court lacked specific jurisdiction. Accordingly, Petrobras was not “found” in the district under § 1782. Id. at *4-*5.

Cornell also failed to satisfy the third requirement, as the CAM was not a “foreign or international tribunal” under the terms of Section 1782. Second Circuit precedent provides that “an arbitral body established by private parties” is not a “foreign tribunal” for purposes of Section 1782. Id. at *6 (citing NBC v. Bear Stearns, 164 F.3d 184, 191 (2d Cir. 1999)). Cornell argued that other decisions and even Supreme Court dicta abrogated the Second Circuit’s decision in NBC, but Judge Rakoff ruled that NBC was still good law, and it was “implausible” to read the Supreme Court’s opinion as an abrogation of this precedent. Therefore, he denied the § 1782 motion. Id. at *6.

Judge Rakoff then addressed Cornell’s motion to unseal the documents submitted by Petrobras during discovery. During the litigation in the Southern District of New York, the parties had submitted the court’s standard form protective order allowing the parties to keep confidential for purposes of the litigation discovery items that either party believed contained secret or sensitive information. The court had also issued a second protective order allowing the parties to file under seal any discovery materials supporting the summary judgment motions that the parties had previously marked as confidential. “However, none of this sealing was intended to be forever, and the parties knew as much.” Id. at *8. Furthermore, the Second Circuit had recently stated that summary judgment papers are judicial documents as a matter of law. Id. (citing Giuffre v. Maxwell, 2019 WL 1150037 (2d Cir. Mar. 11, 2019)). Therefore, “they were judicial documents, and there is a strong presumption in favor of public disclosure of judicial documents.” Nonetheless, the court recognized that small portions of a few documents contained “business information that might harm a litigant’s competitive standing.” Thus the court granted Cornell’s motion to unseal in part. The court ordered the parties to identify the documents that could be unsealed in their entirety, those that must be redacted in part prior to unsealing, and those that should remain sealed. Petrobras could then submit any outstanding objections, and the court would review these documents in camera. After the final unsealing order was entered, “Cornell will then be free to use the unsealed documents as it sees fit.”

4. In United States v. Hoang, 2019 WL 5696306 (D. Utah Nov. 4, 2019), District Judge Tena Campbell denied a defendant’s motion to suppress evidence obtained pursuant to four warrants because, even though the first three warrants were unconstitutionally overbroad, the good faith exception to the exclusionary rule applied, and the defendant lacked standing to challenge the fourth warrant.

Defendant Minh Hoang was indicted on 11 counts of violating 18 U.S.C. § 1832 based on allegations that he illegally downloaded his employer’s trade secrets. Id. at *1. In connection with its investigation, the United States carried out four warrants. The first two warrants authorized agents to search defendant’s home, to seize any computer or computer storage device they discovered and to search the recovered computer storage devices for evidence of stolen trade secrets. The third and fourth warrants directed Comcast Corp. and Google, Inc. to give the United States all data it possessed from defendant’s email accounts and authorized the United States to search the data it received from Comcast and Google for evidence of stolen trade secrets. Defendant later filed a motion to suppress evidence uncovered through each of the warrants.

In this motion, defendant argued that the evidence obtained from the first, second and third warrants should be suppressed because the affidavits offered in support of the warrants improperly relied on double hearsay. Specifically, “[t]he warrants were each supported by an affidavit signed by FBI Special Agent David Rawlings, who declared that ‘[t]he information contained in this affidavit is based primarily on information received from attorneys representing [defendant’s employer] based on an internal investigation by [defendant’s employer], on my personal knowledge and limited investigation, and [on] information I received from other law enforcement agents and officers assisting in his investigation.’” In other words, officers of defendant’s employer passed information to the employer’s attorneys, and those attorneys passed the information to the agent. In defendant’s view, “because of these layers of hearsay, the warrant was not supported by probable cause.”

At the outset of her analysis, Judge Campbell noted that “[t]here is no rule against hearsay in warrant applications.” Id. at *2. Instead, she explained, the relevant question “is whether the hearsay is sufficiently reliable to allow a judge to conclude, in view of the totality of the circumstances, that there was probable cause to justify a search.” Further, “[i]n weighing whether information is reliable, courts consider, among other things, whether the information comes from known or anonymous sources, how the sources acquired their information, and how detailed the information is.” In this case, Judge Campbell concluded, the “information was sufficiently reliable to provide probable cause for the warrant” because the employer’s attorneys identified themselves and identified by name the individuals involved in the employer’s internal investigation, the employer provided a detailed account explaining why defendant’s conduct made its officers suspicious and to what lengths they went to investigate him, and the employer gave the agent details about the alleged thefts. She also rejected defendant’s argument that the agent should not have relied on the employer’s attorneys’ hearsay because “the events they recounted were not recent enough.” While Judge Campbell acknowledged that “a delay in reporting crimes may make the information less reliable,” the delay in this case was “understandable” given the employer’s decision to investigate internally before reporting to the FBI and because defendant’s alleged misconduct was ongoing, so the information provided to the FBI was not stale.

Defendant next argued that the evidence obtained from the first three warrants should be suppressed because the United States was required to demonstrate that it had probable cause for each element of the alleged crime. Id. at *3. In response, the government maintained that an element-by-element analysis at this stage was unnecessary and that it was required only to show that there was probable cause that the crime as a whole was committed. Ultimately, Judge Campbell avoided the question, ruling instead that the government successfully demonstrated probable cause for each element of the alleged thefts of trade secrets. Id. at *4. In particular, Judge Campbell concluded that based on, among other things, the employer’s statements and conduct during and after its internal investigation, as described in the agent’s affidavit, the government had probable cause for each element of the underlying crime. Id. at *4-*5.

Defendant also requested a Franks hearing. Id. at *5. As Judge Campbell explained, a hearing pursuant to the Supreme Court’s decision in Franks v. Delaware, 438 U.S. 154 (1978), may be appropriate where the truthfulness of a warrant application has been challenged. According to defendant, his employer’s officers “made false statements to [the agent], and [the agent] recklessly believed and repeated them.” But Judge Campbell rejected defendant’s request, finding that the affidavit provided probable cause even after excluding all allegedly erroneous evidence.

Defendant next contended that the first three warrants violated the Fourth Amendment’s particularity requirement because the statute cited in those warrants is too broad to provide any meaningful guidance on the search to be conducted. Id. at *7. Specifically, the first three warrants each identified the material to be seized by referring to 18 U.S.C. § 1832. Judge Campbell agreed with defendant that the statute cited was too broad, concluding that “an officer executing a warrant limited only by a citation to § 1832 would have no means of distinguishing between the non-trade secret material from [the employer] and the trade secret material from [the employer].” Id. at *8. Further, even though the warrants each included lists of specific items to be searched or seized, these lists did not save the warrants. In fact, in Judge Campbell’s view, the warrants’ lists “exacerbate, rather than cure, the overbreadth problems” because the warrants encompassed virtually every document that one might expect to find in a modern export company’s office, and these lists did not provide the officers executing the warrants with sufficient guidance to determine which of the company’s materials contained trade secrets and which did not. Accordingly, Judge Campbell ruled that the first three warrants were unconstitutionally overbroad. Id. at *10.

As to the fourth warrant, Judge Campbell ruled that defendant lacked standing to challenge it because he had “no privacy interest in [another person’s] email account, even if some of [defendant’s] emails were discovered there.” Id. at *11.

Finally, Judge Campbell considered the application of the good faith exception to the exclusionary rule. Under this exception, evidence seized pursuant to an invalid warrant will not be suppressed where the officers acted in good faith and in reasonable reliance on the invalid warrant in executing their search. In this case, even though the first three warrants were constitutionally overbroad, Judge Campbell did not believe an objectively reasonable officer would have recognized the warrants’ deficiencies. Id. at *12. Therefore, because the good faith exception applied under the circumstances, Judge Campbell denied defendants’ motion to suppress.