Electronic discovery in Florida.

• Author: Thornburg, Robert H.

Recently, electronic discovery has become a hot topic of conversation here in Florida and nationwide. A 2005 decision by the 15th Judicial Circuit in Palm Beach County, Coleman Holdings, Inc. v. Morgan Stanley & Co., 2005 WL 679071 (Fla. 15th Cir. Ct. 2005), which resulted in a $604.3 million verdict, has spurred much of this debate. In Coleman, defendant Morgan Stanley was accused of defrauding billionaire investor Ron Pearlman in a 1998 cash/stock deal. Pearlman made repeated document requests to obtain Morgan Stanley's internal e-mails relating to the deal. Despite the onset of litigation, Morgan Stanley had failed to preserve these e-mails, and Pearlman requested a jury instruction that the e-mails unveiled a scheme to defraud him. The court agreed and instructed the jury accordingly. The result: A combined jury verdict and attorneys' fees award amounting to over $1 billion.

As the court in Coleman was handing out its adverse jury instruction in West Palm Beach, the Second District Court of Appeal in Lakeland was also ruling on the importance of preserving electronic data. Channel Components, Inc. v. America II Electronics, 915 So. 2d 1278 (Fla. 2d DCA 2005), involved accusations that Channel Components had misappropriated trade secrets from America II. In a lengthy three-year discovery battle, America II had repeatedly requested e-mails and data from Channel's customer tracking program to prove its theory of trade secret theft. During a hearing, Channel stated to the court that the emails no longer existed, despite deposition testimony to the contrary just months prior. The court imposed a sanction of $2,500 per day until Channel Components could locate and produce the requested data. Channel Components produced some materials and appealed the $75,000 sanction as egregious. The Second District disagreed, and affirmed.

If the outcomes in Coleman and Channel Components have not hammered home the growing role of electronic discovery in the practice, they should. In 2004 alone, the costs of electronic discovery preservation, collection, and production totaled more than $700 million, with predictions that the figure could rise to over $1.8 billion in 2006. (1) Today, over 90 percent of a company's documents are created electronically, but never printed. (2) The filing cabinets of yesteryear have gone by the wayside and have been replaced by desktops and laptops. (3)

Just as computers have replaced filing cabinets, e-mail has changed how we communicate and transact business. In 2002, over 1.4 million e-mails were sent and received throughout the U.S. (4) AOL reports e-mail usage now exceeds use of traditional postal services. AOL also projects that ecommerce will continue to grow at a rapid pace in the next three years to a staggering $410.3 billion in 2009. It is little wonder why Judge Ronald Hedges recently declared that "electronic data has become the crucial source of discoverable evidence in corporate litigation and regulation." (5)

But what are the bounds of electronic discovery, and what duties are imposed upon attorneys and their clients to maintain, produce, and use electronic evidence? This article addresses these issues, provides an overview of the Florida cases that have addressed these issues, and outlines the new Federal Rules of Civil Procedure dealing with electronic discovery.

Basis for Electronic Discovery in Florida State Courts

In their current form, the Florida Rules of Civil Procedure do not directly accommodate discovery of electronic data. (6) However, Rule 1.280(b)(1) does state "parties may obtain discovery regarding any matter, not privileged, that is relevant to the subject matter of the pending action...." (7) Rule 1.350(a) also provides that "[a]ny party may request any other party to ... inspect and copy, test, or sample any tangible things that constitute matters within the scope of Rule 1.280(b)...." (8) In 1996, the Fourth District in Strasser v. Yalamanchi, 669 So. 2d 1142 (Fla. 4th DCA 1996), held that both Rule 1.280 and 1.350 are sufficiently broad to include discovery of electronic materials relevant to the underlying dispute. (9) Subsequently, other courts have found the Florida rules not only allow for discovery of a party's electronic data, but also a third party's data. (10) As long as the files are "readily available" in electronic form to the producing party, a requesting party may obtain the underlying electronic data (also known as native files) through a discovery request. (11) However, such request should be appropriately tailored to seek relevant electronic materials and not constitute a mere fishing expedition. (12)

Since Strasser, approximately a dozen Florida cases have dealt with the issue of conducting electronic discovery. The Florida Bar is exploring whether to propose modifications to the current Rules of Civil Procedure similar to the anticipated December 2006 changes to the Federal Rules of Civil Procedure. While the state of the law and the procedural framework for electronic discovery remain in flux, it is clear that Florida law imposes a duty to preserve and produce certain types of electronic evidence. Types of electronic material discoverable under these cases include e-mails, instant messages, computer source code, databases, computer sales reports, and information stored on PDAs.

Production of E-mails and Instant Messages

Instant messages and e-mails remain the most common type of electronic data requested in discovery. (13) The value of this material resides in the fact that unlike traditional correspondence, the ease of sending or replying to an e-mail causes people to say things they would not normally say. This often results in more frank, honest, and damaging statements. The classic example is Arthur Andersen's shredding of Enron-related documents. Several e-mails by Andersen's employees candidly remarked and joked about the shredding of thousands of crucial auditing materials. The result: Those e-mails surfaced, and today Andersen no longer exists.

While e-mail communications and related instant messages have become predominant ways that we communicate both personally and in business, discovery of such materials does have bounds. In Menke v. Broward County School Board, 916 So. 2d 8 (Fla. 4th DCA 2005), defendant Menke was a schoolteacher suspended by the Broward County School Board based upon allegations of improper sexually explicit e-mails and instant messages with minor students. The school board sought discovery of these electronic communications through forensic inspection of Menke's personal home computers, including those used by his family. The administrative law judge handling the allegations agreed and ordered forensic inspection. On appeal, the Fourth District found the ALJ's order too broad. While the e-mails and instant messages were relevant to the allegations, unfettered access to all of the family computers risked disclosing privileged and confidential information. Further, no evidence existed that Menke had intentionally deleted or erased any information to require...