Every practitioner knows that electronic discovery can be daunting. As the volume of material to review, produce and keep confidential grows, the likelihood of error increases. A recent decision from the US District Court for the Northern District of California reinforces counsel's duty to create a system to quarantine an opposing party's confidential information sufficiently. Errors are inevitable, so counsel must make every effort to limit their potential damage.

Apple v. Samsung Electronics illustrates the kind of discovery problems that keep partners awake at night (No. 11-1846 (N.D. Cal. Jan. 29, 2014)). A junior associate representing Samsung uploaded a document produced by Apple that was categorized as "attorneys' eyes only" under a protective order to a file transfer protocol (FTP) site. The document was an Apple and Nokia licensing agreement, the terms of which were required by the protective order to be kept confidential from Samsung employees. Since the FTP site was accessible to certain Samsung employees, the document should have been redacted by Samsung's counsel before it was uploaded, but it was not.

This simple mistake exposed the terms of the Apple and Nokia licensing agreement to more than 200 people unauthorized to view it under the protective order, including many Samsung employees. Additionally, allegations were raised in a declaration from a Nokia employee that during a licensing negotiation, a Samsung employee was able to specifically list the terms of the license agreement. Nokia further stated that the Samsung employee admitted to getting the information from his attorneys.

As a result, the court imposed $2 million in sanctions against Samsung and its outside counsel for the legal fees and costs incurred by Apple and Nokia in litigating the motion for sanctions and the discovery associated with it (No. 11-1846, (N.D. Cal. June 20, 2014)).

The court noted that although there were allegations that Samsung attempted to exploit the information when negotiating with Nokia, there was no evidence that either Apple or Nokia were negatively impacted. However, that was not determinative. The court also acknowledged that a junior associate missing a redaction during large-scale discovery is not, by itself, particularly notable or sanctionable. Even the act of uploading the confidential material, while a breach of the protective order, was a relatively minor error that the court felt did not warrant sanctions.

Instead, the court determined that sanctions were appropriate because:

As the court stated, sanctions were warranted because of the poor system set up by Samsung and its outside counsel to review and protect documents. This system was such that the result of the initial small error was predictable, according to the court.

This decision demonstrates the challenges new technology presents to law firms attempting to fulfill their obligations to their clients and the court. An innocent error can have far-reaching implications. Counsel must take all necessary steps to protect both the client's and the opposing party's confidential material. These precautions should include:

Practical Law can help counsel manage the daunting tasks of e-discovery. For more information, see E-Discovery Toolkit and Practice Note, E-Discovery Case Tracker: Sanctions.