Lawyers Sanctioned $8.5 Million and Reported to State Bar Over Failure to Produce Electronic Evidence

by Lee Gesmer on January 12, 2008

When I was a new lawyer, working at Howrey in Washington, D.C, the firm ‘s client, Litton Industries, was sanctioned in the amount of $10 million for discovery misconduct – the failure to produce relevant documents during discovery. But for the sanction, Litton would have been entitled to an award of its costs and attorneys fees in the litigation, which it had won. I suspect, however, that Litton (and Howrey) took this with good graces – Litton had been awarded $277 million in damages. See Litton Systems, Inc. v. AT&T, 91 F.R.D. 574 (S.D. N.Y 1981), aff’d, 700 F.2d 785 (2nd Cir. 1983).

Ironically, the documents in question (which were produced very late but before trial) were ruled inadmissible at trial, and therefore the defendant suffered no prejudice as a result of the late production.

Even though I was not involved in this case while at Howrey, this painful episode for the firm and the lawyers directly involved left a lasting memory upon my young and impressionable mind, and I recalled it as I read about the pickle in which a group of California lawyers have found themselves in the patent case Qualcomm v. Broadcom.

In the Qualcomm case a key issue was whether Qualcomm, which accused Broadcom of patent infringement, had participated in the Joint Video Team (“JVT”), a standards-setting body. Broadcom aggresively sought discovery from Qualcomm on its involvement in JVT, under the theory that had Qualcomm participated in this process, it would have been barred from suing companies which used the Qualcomm technology that was adopted as part of the standard.

Qualcomm denied participation throughout discovery, but Broadcom had a few documents which gave it reason to believe that Qualcomm had participated in JVT. However, while preparing one of their witnesses during trial Qualcomm’s attorneys searched the witnesses’ laptop computer for the first time, and discovered 21 emails that contradicted Qualcomm’s position in the case, but which had not been produced. Even then the Qualcomm lawyers tried to avoid producing these documents (questioning this witness in such a way that she would not disclose their existence), and only on cross-examination of the witness by Broadcom did the truth begin to emerge. To make a long story short, Qualcomm’s case disintegrated during trial, and after trial (which Qualcomm lost), Qualcomm performed a search of its employee’s email archives, only to discover that there were more than 46,000 documents, totalling over 300,000 pages, that Qualcomm had failed to produce.

One can only imagine the feelings of Qualcomm’s outside counsel as this problem was uncovered and the full extent of the problem emerged. At first they tried to coverup the nondisclosure, and when they finally admitted the true facts the lawyers knew that this problem would be pinned on them as well as on their client. Lawyers are responsible, to some extent, for their client’s failure to provide discovery, and the ball and chain fell heavily on Qualcomm’s outside counsel. In fact, the judge found that Qualcomm had intentionally withheld the documents, that this could not have occurred without assistance or deliberate ignorance by its outside attorneys, and that significant sanctions were appropriate. The outside lawyers were hamstrung in their ability to defend their actions, since Qualcomm would not waive the attorney-client privilege.

The judge ordered Qualcomm to pay more than $8.5 million to Broadcom, which amount represented Broadcom’s attorney’s fees and expenses. He also referred several of the Qualcomm lawyers to the California State Bar, for possible sanctions for ethical violations.

What does this case say to lawyers representing clients in the future? In today’s business environment every comany has electronic evidence. In the “old days” a lawyer had only to search her clients’ file cabinets and warehouses to find relevant evidence. In fact, in the Litton/AT&T case discussed above, the hidden evidence was sitting in the desk drawer of an AT&T employee during the entire case. Now, an outside lawyer knows that failing to properly review a client’s electronic files can result not only in financial sanctions against the client, but in serious sanctions against the lawyer as well. This case emphasizes the reality that lawyers must carefully oversee their clients’ electronic discovery, that they cannot rely exclusively on their clients’ assurances, and that they must be alert to any inconsistencies or hints that full production of evidence may not be taking place.

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